What happens to consumption when there is a decrease in income?

Question

What happens when there is a decrease in income from $120 to $100?

using the equation....

C = $10 + 3/4 disposable income

.....does this even make sense?? lol im assuming you just plug in the dollar amounts and then see what the difference is....no?

Answer 1

This is assuming there are no taxes...

C=10+(3/4)120=10+90=100

C=10+(3/4)100=10+75=85

100-85=15

You just plug the numbers into the formula, nothing more...