"Because Apples and Oranges Are Substitutes, an Increase in the Price

question 109

Multiple Choice

"Because apples and oranges are substitutes, an increase in the price of oranges will cause the demand for apples to increase.This initial shift in demand for apples results in a higher price for apples; this higher price will cause the demand curve for apples to shift to the right." Which of the following correctly comments on this statement?

• A)The statement will be true if consumer tastes for apples and oranges do not change.
• B)The statement is false because a change in the price of apples would not change the demand for apples.
• C)The statement is false because oranges are inferior goods; apples are normal goods.
• D)The statement is false because one cannot assume that apples and oranges are substitutes for all consumers.

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Definitions:

Inventory Turnover

A financial ratio that measures how quickly a company sells and replaces its stock of goods within a period.

Cost Of Goods Sold

Direct financial commitments involved in producing the goods a company sells, covering materials and labor expenses.

Ending Inventory

The total value of goods available for sale at the end of an accounting period, calculated for use in financial reporting and inventory management.

FIFO Cost Assumption

"First-In, First-Out," an inventory costing method that assumes the first items put into inventory are the first ones sold, affecting the calculation of cost of goods sold and ending inventory.