Qn 2.
05 Tan family. Last year, the Tan household spent $11,000 on food, $5,900 on transportation, and $7,200 on other expenses. The cost increases per year by official estimates for food is 4.5%, transportation is 6.2%, and others are 8%. The family’s total income in the previous year was $24,500. This is expected to grow per year by only 3.2%.
Their bank balance at the start of last year was $2,000.
a. Construct a spreadsheet model to evaluate for this year and two more years ahead. Sketch the Influence diagram of your model.
b. Provide answers to various pertinent questions: What proportion of income was and will be spent on the various expenses? What do the current and projected savings and bank balances look like?
c. What should be their minimum income growth rates to ensure the family’s
i) bank balances stay above 0,
ii) incomes keep up with expenses, and
iii) bank balances stay above $2,000?
d. What if they tighten their belt and control cost growth for food to 4%, transportation to 5%, and others to 6%? What again would the minimum income growth rates need to be
