Question

The percent of family income Y, that is spent on necessities S, is given by the line S = 0.85 – 0.000005Y. These are 4-person families living in urban centres with populations between 30,000 and 99,999. Average income in this population is 80,000 dollars.

a. Average spending on necessities for this population is __________ percent

b. Statistics Canada will calculate the LICO for this type of household is equal to __________ dollars

Answer 1

Average spending on necessities for this population = 0.85-0.000005*80000 = 0.45 or 45%

Low income Cut off for a household with 4 persons for urban centres with population between 30,000 and 99,000 is 27,188 (2018, as per statistics canada)
Lico is estimated for families that spend a considerable percent of their income on necessities. 45% will be taken as the average % expenditure on necessities. Then the income corresponding to the 65% expense on necessities (20 percent margin) will be taken as LICO expense after indexing.