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If the price of a commodity increases by 20%, by what percentage should consumption be reduced to keep expenditure the same?
16.67%
20%
25%
15%
16.67%
To keep expenditure constant when the price of a commodity increases by a certain percentage, consumption must be reduced inversely. An increase of 20% (or 51тАЛ) requires a reduction of 61тАЛ, which equals $16.67%.
To keep expenditure constant when the price of a commodity increases by a certain percentage, consumption must be reduced inversely. An increase of 20% (or 51тАЛ) requires a reduction of 61тАЛ, which equals $16.67%.
If you have a fixed monthly budget for fuel and the price of petrol goes up, you have to drive fewer kilometers to spend the exact same amount.
Up by n1тАЛ, Down by $\frac{1}{n+1}
E=P├ЧC тАФ Total expenditure formula
Percentage┬аReduction=100+RRтАЛ├Ч100% тАФ Formula for consumption reduction
Expenditure is the product of price and consumption (E=P├ЧC). Since expenditure remains constant, price and consumption are inversely proportional. When price increases by a factor of 1+x1тАЛ, consumption must decrease by $\frac{x}{1+x}.
Expenditure equals price multiplied by consumption.
Price and consumption are inversely proportional when expenditure is constant.
Helps in quick mental calculations during competitive exams.
Only applicable when total expenditure is held strictly constant.
Budget planning
Household expense management in economics
Option A (16.67%) is correct because 100+2020тАЛ├Ч100=12020тАЛ├Ч100=16.67%.
Option B (20%) is a common distractor where students incorrectly apply the same percentage decrease.
A is correct тАФ A 20% increase in price requires a 16.67% reduction in consumption to keep expenditure constant.
Remember the shortcut: if price increases by r%, required percentage decrease in consumption is 100+rrтАЛ├Ч100%.