Multiple choice

If the price of milk falls down by $20\%$. By how much percent must a householder increase its consumption, so as not to decrease his expenditure on this item?

  1. $20\%$
  2. $30\%$
  3. $25\%$
  4. $15\%$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

If price decreases by 20%, the new price is 0.8 of the original. To keep expenditure constant, consumption must increase by (1/0.8) - 1 = 1.25 - 1 = 0.25, which is 25%.

AI explanation

Let the initial price be 100 and the initial consumption be 1 unit, making the total expenditure 100. The new price after a 20 percent fall is 80, and to keep the expenditure at 100, the new consumption must be 100 divided by 80, which equals 1.25 units. The required increase in consumption is 0.25 divided by 1, and multiplying by 100 gives 25 percent.

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