Due to increase of 15% in the price of milk, a family reduces its consumption of milk by 15%. What was the effect on expenditure of that family on account of milk?
Expenditure = Price ×Quantity
Given that Price increases by 15% and Consumption (quantity) decreases by 15%
Price′=Price+(15100)×Price=(115100)×PriceQuantity′=Quantity−(15100)×Quantity=(85100)×QuantityExpenditure′=Price×Quantity=(115100)×(85100)×(Price×Quantity)Expenditure′=0.9775×Expenditure=(1−0.02225)×Expenditure=Expenditure−(2.25100)×Expenditure
Expenditure′=Expenditure−2.25% ofExpenditure
∴Expenditure decreases by 2.25%