Question #49953

If I have an equation: C=500+.95(Q-T), how am I able to find C without Q? or vice versa? Thanks!

Expert's answer

C=500+.95(Q-T) is the equation of consumption, where Q is GDP and T is taxes. GDP = C/c, where c is marginal rate of consumption and c = 0.95 in our case.

So, to find C without Q:

C = 500 + 0.95*(C/0.95 - T) = 500 + C - 0.95T

Vice versa Q = C/0.95

So, to find C without Q:

C = 500 + 0.95*(C/0.95 - T) = 500 + C - 0.95T

Vice versa Q = C/0.95

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