A general equation of a linear function is expressed as y = mx + b where m represents the slope and b is the y-intercept. The slope is the rate of change of y with respect x which is equal to 4 for this problem. The y-intercept represents the value when x is equal to zero. It is the initial value of y. In this case, it is equal to $1,000. The linear equation would be:
y = 4x + 1000
assuming y is the income and x is the consumption.
At an income (y) equal to $20,000, we can calculate for the consumption.
20000 = 4x + 1000
19000 = 4x
x = 4750
