Linda earned an income of $3,000 per month, which has now increased to $3,500 per month. She saves 10 percent and spends the remainder on food, lodging, and other expenses. So far, she has managed to save $20,000. What is her consumption per month before and after the increase in income?
A) $2,700; $3,000
B) $3,000; $3,000
C) $2,700; $3,150
D) $3,150; $3,500
E) $3,000; $3,500

Question

Quizplus · Accepted Answer

Linda saves 10% of her income, which means she spends 90% of it on expenses.

We know she has saved $20,000, which is 10% of her total income.

Let's use x as her previous monthly income:

0.1x = $20,000

x = $200,000

This means Linda's previous monthly income was $200,000 / 12 months = $16,666.67

Her current income is $3,500, which means her expenses are:

$3,500 * 0.9 = $3,150

Therefore, her consumption per month before the increase in income was $16,666.67 - $2,000 (savings) = $14,666.67, and after the increase it is $3,150.

So the answer is C: $2,700; $3,150.

Linda Earned an Income of $3,000 Per Month, Which Has