Define the variables

Let the original price be $P$ and original consumption be $C$. The original expenditure is $E = P \times C$. After a 25% increase, the new price is $1.25P$.

$P_{new} = P \times (1 + 0.25) = 1.25P$

Set up the equation for constant expenditure

Let the new consumption be $C_{new}$ such that the expenditure remains $P \times C$.

$1.25P \times C_{new} = P \times C$

Calculate the ratio of new consumption to original consumption

Solve for $C_{new}$ in terms of $C$.

$C_{new} = \frac{C}{1.25} = 0.8C$

Calculate the percentage reduction

The reduction in consumption is $C - 0.8C = 0.2C$. Converting this to a percentage relative to $C$ gives $0.2 \times 100\% = 20\%$.

$\text{Reduction} = \frac{C - 0.8C}{C} \times 100\% = 20\%$