Question
If the price of an essential good rises by 18% and the
consumer decreases his consumption by 12%, what will be the percentage change in the expenditure?Solution
Let the original quantity be ‘x’ units and the price be Rs. ‘y’.Initial expenditure = Rs. xy
New increased price = Rs. 1.18y
Reduced consumption = 0.88x
New expenditure = 1.18y × 0.88x = Rs. 1.0384xy
Hence, the expenditure increases by approximately 4%
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