When Her Income Increased from $30,000 to $40,000,Toby's Consumption of Macaroni

question 82

Multiple Choice

When her income increased from $30,000 to $40,000,Toby's consumption of macaroni decreased from 8 kilograms to 6 kilograms and her consumption of soy burgers increased from 3 kilograms to 4 kilograms.What can we conclude for Toby

• A)Macaroni and soy burgers are both normal goods with income elasticities equal to 1.
• B)Macaroni is an inferior good and soy burgers are normal goods; both have income elasticities of 1.
• C)Macaroni is an inferior good with an income elasticity of -1, and soy burgers are normal goods with an income elasticity of 1.
• D)Macaroni and soy burgers are both inferior goods with income elasticities equal to -1.

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Definitions:

Variable Costing

An accounting method where only variable costs (costs that change with production levels) are included in product costs, excluding fixed costs.

Net Operating Income

The total profit of a business after operating expenses have been deducted, but before taxes and interest.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold, excluding fixed manufacturing overhead.

Contribution Margin

The gap between sales income and variable expenses, showing the extent to which income aids in offsetting fixed expenses and creating earnings.