If an Increase in Income Leads to an Decrease in the Demand

question 217

Multiple Choice

If an increase in income leads to an decrease in the demand for salami,then salami is

• A)an inferior good.
• B)a neutral good.
• C)a necessity.
• D)a normal good.

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Definitions:

Variable Costs

Outlays that shift in tandem with the quantity of goods produced.

Long Run

A period sufficient for all inputs and production processes to be adjusted, including changing the scale of production facilities.

Average Fixed Costs

Average Fixed Costs are the total fixed costs of production divided by the quantity of output produced.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or output in the short run, such as rent or salaries.