Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income.Letting C represent consumption and Y represent income,the equation that summarizes this relationship is:

A) C = 80 + 100Y.
B) C = 100 + .8Y.
C) C = 100 + 80Y.
D) C = 80 + .1Y.

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Navya Batra · Accepted Answer

Final Answer : B, Explanation :  According to the problem, when the income is zero, the consumption is $100. This means that the intercept (where the line intersects the y-axis) is 100. Also, for every $100 increase in income, the consumption increases by $80. This means that the slope of the line is 80/100 or 0.8. Therefore, the equation that summarizes this relationship is C = 100 + 0.8Y, which is equivalent to choice B.

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