Question

Assume that the direct tax T system takes 25% of income (Y) regardless of the size and that an individual consumption (C) is 500 plus 80% disposable income (Yd) express the relation C = F(Y) in algebra and in diagram

Answer 1

If the direct tax T system takes 25% of income (Y) regardless of the size and that an individual consumption (C) is 500 plus 80% disposable income (Yd), then the relation is:

$C = 500 + 0.8Y×(1 - 0.25) = 500 + 0.6Y.$