Multiple choice

If tax on commodity is decreased by $15\%$ and its consumption increases by $10\%$, then the percentage decrease in the revenue is:

  1. $15\%$
  2. $\displaystyle 8\frac{1}{2}\%$
  3. $\displaystyle 6\frac{1}{2}\%$
  4. $5\%$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Revenue = Tax * Consumption. Let initial values be 100. New revenue = (100 * 0.85) * (100 * 1.10) = 85 * 1.1 = 93.5. The decrease is 100 - 93.5 = 6.5%, which is 6 1/2%.

AI explanation

Using the formula for net percentage change in revenue, calculate 10 minus 15 minus 10 times 15 divided by 100. This equals minus 5 minus 1.5, resulting in a 6.5% decrease, which is 6 and a half percent.

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