The tax on a commodity is diminished by 20% and its consumption increased by 15%.

The tax on a commodity is diminished by 20% and its consumption increased by 15%. The effect on revenue is?

Answer/Solution

It decreases by 8%

Explanation:
100 * 100 = 10000
80 * 115 = 9200
-----------
10000-----------800
100-----------? => 8% decrease
ANSWER IS B

The tax on a commodity is diminished by % and its consumption increased by %. The effect on revenue is?

In order to solve problem, you must evaluate 100 - (n₁ / 100 + 1) * (1 - n₀ / 100) * 100.

n₀ =	20
n₁ =	15

100 - (n₁ / 100 + 1) * (1 - n₀ / 100) * 100
Evaluate n₁ / 100 = 0.15
100 - (0.15 + 1) * (1 - n₀ / 100) * 100
Evaluate 0.15 + 1 = 1.15
100 - 1.15 * (1 - n₀ / 100) * 100
Evaluate n₀ / 100 = 0.2
100 - 1.15 * (1 - 0.2) * 100
Evaluate 1 - 0.2 = 0.8
100 - 1.15 * 0.8 * 100
Evaluate 1.15 * 0.8 = 0.92
100 - 0.92 * 100
Evaluate 0.92 * 100 = 92
100 - 92
Evaluate 100 - 92 = 8
8
The answer to the problem and the result of 100 - (n₁ / 100 + 1) * (1 - n₀ / 100) * 100 is 8