Price of an item is increased by 20% and consumption reduced by 30%. Find the percentage change in expenditure?
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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