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?

2.50 %

decrease

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2.25 %

decrease

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2 %

decrease

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5 %

decrease

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Solution

The correct option is B $2.25 %$ decrease
Expenditure = Price $\times$ Quantity
Given that Price increases by $15$ % and Consumption (quantity) decreases by $15$ %
$P r i c e^{'} = P r i c e + (\frac{15}{100}) \times P r i c e = (\frac{115}{100}) \times P r i c e Q u a n t i t y^{'} = Q u a n t i t y - (\frac{15}{100}) \times Q u a n t i t y = (\frac{85}{100}) \times Q u a n t i t y E x p e n d i t u r e^{'} = P r i c e \times Q u a n t i t y = (\frac{115}{100}) \times (\frac{85}{100}) \times (P r i c e \times Q u a n t i t y) E x p e n d i t u r e^{'} = 0.9775 \times E x p e n d i t u r e = (1 - 0.02225) \times E x p e n d i t u r e = E x p e n d i t u r e - (\frac{2.25}{100}) \times E x p e n d i t u r e$
$E x p e n d i t u r e^{'} = E x p e n d i t u r e - 2.25$ % $o f E x p e n d i t u r e$
$∴ E x p e n d i t u r e d e c r e a s e s b y 2.25$ %

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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?

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?