Disposable income is total income

Step 1: Analyze the question The question asks how disposable income relates to total income. The key is to understand what "disposable" means in economics.

Step 2: Explain the concept Disposable income is the income a person actually has available to spend or save after the government has taken its share through taxes. The word "disposable" means "available for use."

The formula is:

Disposable Income = Total Income − Direct Taxes (income tax)

(In fuller definitions, transfer payments received, such as pensions, may be added, but the core idea is that tax is subtracted.)

Step 3: Work through the options

• A. less tax: This matches the formula. Total income minus tax gives disposable income.
• B. divided by tax: Division has no meaning in this context.
• C. plus tax: Adding tax would make income larger, which makes no sense. Tax reduces what you take home.
• D. multiplied by tax: This is not a valid economic relationship.

Step 4: Example If a worker in Lagos earns ₦200,000 a month and pays ₦30,000 in tax:

Disposable income = ₦200,000 − ₦30,000 = ₦170,000

This ₦170,000 is what the worker can spend on food, rent and transport, or save.

Step 5: Answer The correct option is A. less tax.

Exam tip: Remember "Disposable = what's left after deductions." Whenever you see "disposable income," think of take-home pay: Gross income − Tax. A related term is "National Disposable Income," which uses the same idea at the country level.