The Municipality of a town increases water tax by 20% and water consumption decreased by 20%. Then the…
The correct choice is: “4% decrease” Expenditure = tax rate × consumption. Take the old rate and old consumption as 1 each, so the old expenditure is 1. New expenditure =…
Choose your answer
The Municipality of a town increases water tax by 20% and water consumption decreased by 20%. Then the percentage of increase or decrease in the monthly expenditure is:
Answer and explanation
Correct answer B
The correct choice is: “4% decrease”
Expenditure = tax rate × consumption. Take the old rate and old consumption as 1 each, so the old expenditure is 1.
New expenditure = 1.20 × 0.80 = 0.96, which is 4% less than before.
Shortcut: for a change of +x% followed by −x%, the net change is −x²/100 % = −400/100 = −4%. So a 20% rise in price and a 20% fall in quantity never cancel out: they always give a net decrease.
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CLAT UG