Suppose That a 20 Percent Increase in the Price of Normal

question 42

Multiple Choice

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X.The coefficient of cross elasticity of demand is

• A)negative, and therefore these goods are substitutes.
• B)negative, and therefore these goods are complements.
• C)positive, and therefore these goods are substitutes.
• D)positive, and therefore these goods are complements.

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Definitions:

Average Cost Method

An inventory valuation method that calculates the cost of goods sold and ending inventory based on the weighted average cost of all items available for sale.

Average Cost

An inventory costing method where the cost of goods sold and ending inventory is determined by taking the weighted average of all units purchased.

Periodic Inventory

A method of inventory accounting where updates to inventory levels are made periodically, often at the end of the fiscal year.

Ending Inventory

The total value of goods available for sale at the end of an accounting period, calculated by adding purchases to beginning inventory and subtracting cost of goods sold.