A 10 Percent Increase in the Price of Sugar Reduces

question 27

Multiple Choice

A 10 percent increase in the price of sugar reduces sugar consumption by about 5 percent. The increase causes households to

• A) spend more on sugar.
• B) spend less on sugar.
• C) spend the same amount on sugar.
• D) consume more goods like coffee and tea that are complements of sugar.

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Definitions:

Sales Tax

A tax levied by the government on the sale of goods and services.

Credit Sales

Credit sales are transactions where goods or services are provided to a customer with the agreement that payment will be made at a later date.

Liability Classification

The process of categorizing liabilities on the balance sheet as either current (due within one year) or long-term.

Short-Term Obligation

A debt or other financial obligation that is due to be paid within one year or within the entity's operating cycle if longer.