Last Year, After Shirley Received a 14 Percent Pay Increase

question 426

Multiple Choice

Last year, after Shirley received a 14 percent pay increase, she increased the quantity of pork chops she purchased by 6 percent. Hence, her income elasticity of demand for pork chops equals

• A) 0.43.
• B) -0.43.
• C) 2.33.
• D) -2.33

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Definitions:

Accrual Basis

An accounting method where income and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged.

Accounting Records

The documentation of all the financial transactions and positions of a business, kept for the purpose of financial reporting and auditing.

Cash Basis

An accounting method where revenues and expenses are recognized only when cash is received or paid out.

Incurred Expenses

Costs that have been recognized or consumed in the operations of a business, regardless of the payment status.