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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