Suppose That the Economy Is Growing and That Incomes Increase

question 5

Multiple Choice

Suppose that the economy is growing and that incomes increase by 14%. The demand for foreign airline travel increases by 18%. What is the income elasticity for foreign airline travel?

• A) -1.29
• B) 1.29
• C) .77
• D) 1.77

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Definitions:

Standard Cost

A financial estimate used to set a cost benchmark for manufacturing products, based on expected direct material, direct labor, and overhead costs.

Per Unit

Refers to a measurement or cost attributed to each individual unit of production or purchase.

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours planned, multiplied by the labor rate.

January

The initial month in the Gregorian calendar, marking the start of the year.