Question 16

Water tax is increased by 20% but its consumption is decreased by 20%. Then the increase or decrease in the expenditure of the money is

Solution

Expenditure = Price $$\times$$ Consumption

e = pc

When price is increased by 20% but its consumption is decreased by 20%,

p'= 1.2 p

c'= .8c

e' = .96pc

Decrease % in expenditure = $$\frac{.04pc}{pc} \times 100$$ = 4 %

So, the answer would be option b)4% decrease

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