Suppose a curve shows that every time family income increases by $1, spending increases by $.80. If spending increases by $100, then income increased by
A)$8.
B)$80.
C)$100.
D)$125.
E)$12.5.

Question

Quizplus · Accepted Answer

Let x be the increase in family income. According to the problem, we have:

$$\frac{\Delta 	ext{Spending}}{\Delta 	ext{Income}} = 0.8$$

Multiplying both sides by $\Delta 	ext{Income}$, we have:

$$\Delta 	ext{Spending} = 0.8 \Delta 	ext{Income}$$

If spending increases by $100$, we have:

$$100 = 0.8x$$

Solving for $x$, we get:

$$x = \frac{100}{0.8} = 125$$

Therefore, the increase in income is $125$. The answer is (D).

Suppose a Curve Shows That Every Time Family Income Increases