On a Projected Income Statement, a Business Owner's Target Income

question 138

Multiple Choice

On a projected income statement, a business owner's target income is ________.

• A)the sum of a reasonable salary for the time spent running the business and a normal return on the amount invested in it
• B)the income at which the company's total revenues and its total expenses are equal
• C)the income that will produce a 10 percent return on the owner's financial investment in the business
• D)the income that the owner could earn working for someone else

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Definitions:

Engel Curve

A graphical representation that shows how household spending on a particular good or service varies with income.

Demand Curve

A graphical representation of the relationship between the price of a good and the quantity demanded, typically downward sloping.

Giffen Good

A type of inferior good for which demand increases as its price increases, contrary to the typical law of demand.

Slutsky Substitution Effect

A concept in economics that describes how a change in the price of a good affects consumption patterns, separating the effect into income and substitution effects.