Question

The tax on a commodity is diminished by 10% and its consumption increases by 10%. Find the effects on revenue.

• A. 1% increase
• B. 2% increase
• C. 3% decrease
• D. None of these

Answer 1

The correct option is D None of these

$Sincetax\times consumption=revenue$
$\therefore$ Net % change in revenue

$=(x+y+\frac{xy}{100})\%$

$=(-10+10+\frac{10\times 10}{100})\%$
(here x = -10 and y = 10) = -1%
$\therefore$ The revenue decreases by 1%.