Suppose There Is a Reduction in the Price of Food

question 4

Multiple Choice

Suppose there is a reduction in the price of food while consumers' income and the price of non-food stay the same,which of the following statement is true?

• A) spending on food consumption will always increase.
• B) budget line will rotate out from the endpoint on the axis of food.
• C) budget line will rotate out from the endpoint on the axis of non-food.
• D) the slope of the budget line will stay the same.

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Definitions:

Contribution Margin

The difference between the sales revenue of a product and its variable costs, used to cover fixed costs and generate profit.

Sales Revenues

The total amount of money generated from sales of goods or services before any expenses are subtracted.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as raw materials and packaging.

Scattergraph Method

A statistical tool used to plot data points on a graph to identify potential trends, often used in cost accounting to analyze variable costs against a level of activity.