The Only Goods You Consume Are Pizza and Soda

question 263

Multiple Choice

The only goods you consume are pizza and soda. Both are normal goods. For you, pizza and soda are substitutes. Which of the following leads you to buy more of both goods?

• A) The price of a pizza falls.
• B) The price of a soda falls.
• C) Your income increases.
• D) Both answers A and B are correct.

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Definitions:

Expenses

Costs incurred in the process of earning revenue; typically classified as fixed, variable, or periodic expenditures.

Breakeven Point

The point at which total cost and total revenue are equal, resulting in no net loss or gain for a business or project.

Variable Costs

Costs that change in proportion to the level of production or activity within a business, such as materials and labor costs.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales activities, such as rent, salaries, and insurance.