Suppose All Prices Increase by 10 Percent in the Year

question 340

Multiple Choice

Suppose all prices increase by 10 percent in the year while the total sales of HDTVs remain constant. This is

• A)a violation of the law of demand since fewer HDTVs should be purchased at a higher price.
• B)a violation of the law of demand since more HDTVs should have been purchased with higher incomes.
• C)not a violation of the law of demand since the relative price of HDTVs did not change.
• D)not a violation of the law of demand since the law of demand does not apply to expensive goods like HDTVs.

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Definitions:

Markup Percentage

The proportion of the cost of goods that is added to cover the overhead and profit, which sets the selling price.

Variable Cost

Costs that change in proportion to the level of production or sales activity, such as raw materials and direct labor.

Markup Percentage

The percentage added to the cost of goods to cover overhead and profit when setting the selling price.

Total Cost

The complete expense incurred in producing a product or delivering a service, including both fixed and variable costs.