Figure 21-12 -Refer to Figure 21-12.If the Consumer Is Currently at Point

question 290

Multiple Choice

Figure 21-12
-Refer to Figure 21-12.If the consumer is currently at point A in the figure,a movement to point B as a result of a decrease in the price of potato chips represents the

• A) substitution effect.
• B) income effect.
• C) budget effect.
• D) price effect.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs, both variable and fixed, in the cost of producing each unit of a product.

Variable Costing

An accounting method that only allocates variable costs to the inventory; fixed manufacturing overhead is expensed as incurred.

Cost Structure

The composition of a company's costs, both fixed and variable, that are incurred in the operation of its business.

Variable Costing

An accounting method that only considers variable costs - costs that change with production volume - in calculating the cost of goods sold.