The Difference Between a Price Decrease and an Increase in Income

question 57

Multiple Choice

The difference between a price decrease and an increase in income is that

• A) A price decrease does not affect the consumption of other goods, while an increase in income does.
• B) An increase in income does not affect the slope of the budget line, while a decrease in price does change the slope.
• C) A price decrease decreases real income, while an increase in income increases real income.
• D) A price decrease leaves real income unchanged, while an increase in income increases real income.

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Definitions:

Cost Of Goods Sold

Expenses explicitly tied to the production of a company's sold goods, comprising costs of materials and labor.

Net Sales

Total sales revenue minus returns, allowances, and discounts, representing the actual revenue earned from sales.

Gain On Sale

The profit that is realized from the sale of an asset or investment, which exceeds the purchase price.

Interest Expense

The expenditure on borrowed funds that an entity bears over a certain period.