Water tax is increased by 20 % but its consum | vedclass

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(A) We know that: $	ext{Tax} 	imes 	ext{Consumption} = 	ext{Expenditure}$.Let the initial tax be $T$ and initial consumption be $C$. Initial expen

Vedclass · Accepted Answer

$4 \%$ decrease

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(A) We know that: $	ext{Tax} 	imes 	ext{Consumption} = 	ext{Expenditure}$.Let the initial tax be $T$ and initial consumption be $C$. Initial expenditure $= T 	imes C$.New tax $= T + 20\% 	ext{ of } T = 1.2T$.New consumption $= C - 20\% 	ext{ of } C = 0.8C$.New expenditure $= 1.2T 	imes 0.8C = 0.96(T 	imes C)$.Change in expenditure $= 0.96(T 	imes C) - (T 	imes C) = -0.04(T 	imes C)$.Percentage change $= -0.04 	imes 100 = -4\%$.Alternatively,using the formula for net percentage change: $\left(x + y + \frac{xy}{100}ight) \%$.Here,$x = 20$ and $y = -20$.Net change $= \left(20 - 20 + \frac{20 	imes (-20)}{100}ight) \% = (0 - 4) \% = -4 \%$.Therefore,the expenditure decreases by $4 \%$.

Water tax is increased by $20 \%$ but its consumption is decreased by $20 \%$. The increase or decrease in the expenditure is:

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