Cindy Consumes Goods X and Y

question 26

Multiple Choice

Cindy consumes goods x and y.Her demand for x is given by x(p_x, m) = 0.04m -4.24p_x.Now her income is $322, the price of x is $2, and the price of y is $1.If the price of x rises to $3 and if we denote the income effect on her demand for x by DI and the substitution effect on her demand for x by DS, then

• A)DI = 0 and DS = -2.00.
• B)DI = -0.18 and DS = -0.52.
• C)DI = -0.52 and DS = -0.52.
• D)DI = -0.18 and DS= -4.06.
• E)None of the above.

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Definitions:

Manufacturing Overhead

Indirect factory-related costs that are incurred when a product is manufactured, excluding direct materials and direct labor.

Direct Labor

The amount spent on salaries for personnel directly engaged in creating goods or providing services.

Total Manufacturing Costs

The aggregate cost of direct materials, direct labor, and manufacturing overhead incurred to produce finished goods.

Current Asset Items

Assets expected to be converted into cash, sold, or consumed within a year or within the normal operating cycle of a business.