Consider the Indifference Curve Map and Budget Constraint for Two

question 284

Multiple Choice

Consider the indifference curve map and budget constraint for two goods,X and Y.Suppose the good on the horizontal axis,X,is normal.When the price of X increases

• A) the substitution effect and income effect both cause an increase in the consumption of X.
• B) the substitution effect causes a decrease in the consumption of X,and the income effect causes an increase in the consumption of X.However,the substitution effect is greater than the income effect.
• C) the substitution effect causes an increase in the consumption of X,and the income effect causes a decrease in the consumption of X.However,the substitution effect is greater than the income effect.
• D) the substitution effect and income effect both cause a decrease in the consumption of X.

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Definitions:

Revenue Recognition Principle

An accounting principle that dictates the specific conditions under which revenue is recognized or recorded, ensuring it's captured in the period it is earned.

Reversing Entries

Journal entries made at the beginning of an accounting period to reverse or cancel out adjusting entries made at the end of the previous accounting period, simplifying record-keeping.

Profit Margin

A financial ratio calculated as net income divided by revenue, expressing the percentage of each dollar of revenue that remains as profit.

Net Income

The profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.