Question

Sales tax on the cloth is reduced by $10\%$ but the sales increase by $10\%$. What is the effect on the revenue earned as sales tax?

• A. Remains the same
• B. Increases by $5.5\%$
• C. Decreases by $5.5\%$
• D. Decreases by $1\%$

Answer 1

The correct option is A Remains the same

Let the sales be of $x$ and the sales tax be $y$

Then,

Revenue=$x+\frac{y}{100}x-\left(1\right)$

When Sales tax recued by $10$ but sales increase by $10$ then

Revenue$=(x+\frac{10}{100}x+\frac{(y-10)}{100}x$

$=x+\frac{10}{100}x+\frac{y}{100}x-\frac{10}{100}x$

$=x+\frac{y}{100}x-\left(2\right)$

from eqs.(1) and (2) we

Revenue remains the same.