Sam Has $200 a Month to Spend on Two Normal

question 39

Multiple Choice

Sam has $200 a month to spend on two normal goods-tanning sessions or rounds of golf.Tanning sessions are $20 each,and a round of golf is $40.Sam currently consumes six tanning sessions and two rounds of golf.If the price of a round of golf drops to $20,the income effect:

• A) predicts Sam will increase his consumption of both golf and tanning sessions.
• B) predicts Sam will double his consumption of golf.
• C) predicts Sam will consume more golf and less tanning sessions.
• D) predicts Sam will consume less golf and more tanning sessions.

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Definitions:

Budgeting

The process of creating a financial plan or forecast for a specific period, detailing expected revenues and expenditures.

Employee Salaries

Fixed payments made to employees for their services over a specified period, typically monthly or bi-monthly.

Budgeting

The process of creating a financial plan to manage revenue and expenses for a specific period, often key to strategic planning in businesses and personal finance management.

Activity Variance

The difference between the budgeted amount of an activity and the actual amount incurred.