Discussion

Explanation:

Let initial price be P and consumption be C.

Initial expenditure (E) = P × C   ...(1)

New price = 1.2P and new consumption = 0.7C

New expenditure (E') = 1.2P × 0.7C = 0.84PC = 0.84E (From (1))

Hence, % change in expenditure = 0.84E-EE × 100 = -16%.

Hence, expenditure reduces by 16%.

Alternately,
Expenditure is first increased by 20% (due to price) and then successively reduced by 30% (due to consumption)

∴ Net % change = 20 – 30 + 20×-30100 = -10 – 6 = -16%

Hence, option (a).

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