Question

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 the change in her consumption per month after the increase in income?

Answer 1

The change in Linda's consumption per month after the increase in income is $3,150

Given,

Income = $3,000

Increased Income = $3,500 per month

Savings = 10 percent

So Linda's consumption per month after the increase in income is calculated below.

Increased Income - Savings

= $3,500 - 10%

= $3,150

Thus, $3,150 is the change in Linda's consumption per month after the increase in income.

When the consumption increases as the income increases, and the larger the marginal propensity to consume, the more sensitive current spending becomes to current disposable income.

Hence, individuals tend to increase their consumption as their income increases, but to a lesser extent.

To learn more about consumption here:

brainly.com/question/15145342

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