The Callaway family owns a small bait and tackle shop in a resort town in Wisconsin. An economic recession reduces the number of tourists for one summer, which reduces the family's income for that year. For the Callaway family, their

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Permanent income is an estimate of a person's average income over a longer period, while transitory income refers to temporary fluctuations from this average. In the case of the Callaway family, the reduction in income due to a recession is a temporary situation, affecting their transitory income for that year. Their permanent income, which is an average expected over many years, would likely remain higher than the transitory income they receive during the recession-affected year.

The Callaway Family Owns a Small Bait and Tackle Shop