An Individual Derives Utility from Games, G (Y-Axis), and Toy

question 62

Multiple Choice

An individual derives utility from games, g (y-axis) , and toy airplanes, a (x-axis) , described by the utility function U(g,a) = g^0.6a^0.4. The price per game is $20 and the price of toy airplanes is $10. Using the slope of the income consumption curve (ICC) , determine whether games and toy airplanes are normal or inferior goods when income increases from $100 to $200.

• A)Both goods are normal goods with an ICC slope of .
• B)Both goods are normal goods with an ICC slope of .
• C)Both goods are inferior goods with an ICC slope of - .
• D)Both goods are inferior goods with an ICC slope of - .

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Definitions:

Consumer Division

A segment within a company focused on selling products and services directly to consumers, as opposed to business or commercial clients.

Break-even Sales

The amount of revenue needed to cover both the variable and fixed costs of a business, resulting in neither profit nor loss.

Absorption Costing

is an accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overhead) in the cost of a product.

Unit Product Cost

The total cost (including materials, labor, and overhead) to produce a single unit of a product.