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Water tax is increased by 20% but its consumption is decreased by 20 %. Then, the increase or decrease in the expenditure of the money is:________?

Correct answer: D. 4 % decrease

  • A. No change
  • B. 5 % decrease
  • C. 4 % increase
  • D. 4 % decrease

Explanation

If the original tax and consumption are 100 units each, the original expenditure is 10,000 expenditure units. The new expenditure is 120 x 80 = 9,600 expenditure units, so the decrease is 400 / 10,000 x 100 = 4%. Option b, 5% decrease, usually results from treating the 20% changes as a simple subtraction rather than applying them successively to expenditure.

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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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