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The tax on a commodity is diminished by 20% but its consumption is increased by 10%. Find the decrease percent in the revenue derived from it?

Correct answer: D. 12%

  • A. 20%
  • B. 18%
  • C. 15%
  • D. 12%

Explanation

Revenue equals tax per unit multiplied by consumption. After a 20% tax reduction and a 10% consumption increase, revenue becomes 80% x 110% = 88% of the original revenue, so the decrease is 100% - 88% = 12%. The likely trap is 20%, which ignores the compensating 10% increase in consumption.

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Percentages express a quantity as parts per hundred and support calculations involving increases, decreases, discounts, commissions, taxes, and successive changes. Questions require distinguishing percentage change from percentage points and identifying the original value when a final value and its percentage change are given.

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