What Is the Income Effect of an Increase in the Price

question 172

Multiple Choice

What is the income effect of an increase in the price of backpacks (a normal good) ?  

• A) a decrease in the demand for backpacks 
• B) a decrease in the quantity demanded of backpacks 
• C) an increase in the demand for backpacks 
• D) an increase in the quantity demanded of backpacks

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, estimated before the costs are incurred.

Factory Overhead

The total of all the indirect costs associated with manufacturing, not including direct labor or direct materials.

Applied to Production

Pertaining to costs or accounting methodologies directly associated with the manufacturing or creation process of goods or services.

Work in Process Inventory

Goods partially completed but not yet ready for sale, particularly in manufacturing, representing an ongoing production stage.