The Income Effect of a Price Change Refers to the Impact

question 153

Multiple Choice

The income effect of a price change refers to the impact of a change in

• A)income on the price of a good.
• B)demand when income changes.
• C)the quantity demanded when income changes.
• D)the price of a good on a consumer's purchasing power.

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Definitions:

Percentage Of Sales

A method or analysis tool that expresses components of a financial statement as a percentage of total sales.

Variable Expense

Costs that fluctuate with the level of production or business activity, such as raw material costs and shipping fees.

Break-Even

Break-even is the point at which total revenues equal total costs, resulting in no net profit or loss, indicating the volume of sales needed to cover costs.

Fixed Expense

Fixed expenses are costs that do not change with the level of production or sales volume, such as rent or salaries.