Question : The price of an edible oil is increased by 25%. To maintain the budget, Sushma reduces the consumption of this oil by 20%. The increase in expenditure due to this edible oil is:
Option 1: 0%
Option 2: 1%
Option 3: 2%
Option 4: 3%
Correct Answer: 0%
Solution :
Increase in price = 25%
Decrease in consumption = 20%
For successive percentage change use the following formula,
$x+y+\frac{xy}{100}$, where $x$ and $y$ are percentage increases or decreases, if increases take positive and if decreases take negative.
Required change in Expenditure = 25 + (–20) + $\frac{(25)(–20)}{100}$ = 25 – 20 – $\frac{500}{100}$ = 5 – 5 = 0%
It means no change will take place in expenditure.
Hence, the correct answer is 0%.
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