Question:medium

The Municipality of a town increases water tax by 20% and water consumption decreased by 20%. Then the percentage of increase or decrease in the monthly expenditure is:

Updated On: Jul 15, 2026
  • 4% increase
  • 4% decrease
  • 5% increase
  • 5% decrease
Show Solution

The Correct Option is B

Approach Solution - 1

Step 1: Set up the expenditure formula.
Monthly water expenditure equals the tax rate multiplied by the amount of water used. If the original rate is \( R \) and original consumption is \( C \), then expenditure \( E = R \times C \).

Step 2: Apply the given percentage changes.
The tax rate rises by 20%, so the new rate is \( 1.2R \). Consumption falls by 20%, so the new consumption is \( 0.8C \).

Step 3: Find the new expenditure.
New expenditure \( = 1.2R \times 0.8C = 0.96\,RC \). Comparing this to the original expenditure \( RC \), the factor \( 0.96 \) means expenditure has fallen to 96% of its original value.

Step 4: Final Answer.
A drop from 100% to 96% is a decrease of exactly 4%. \[ \boxed{4\% \text{ decrease}} \]
Was this answer helpful?
0
Show Solution

Approach Solution -2

The net percentage change in a value affected by two successive percentage changes, here a 20% rise in tax rate and a 20% fall in consumption, can be found directly using the formula for combined percentage change: \( a + b + \frac{ab}{100} \), where \( a \) and \( b \) are the two percentage changes with their signs.

  1. 4% increase: Substituting \( a=20 \) and \( b=-20 \) into the formula gives \( 20 + (-20) + \frac{20 \times (-20)}{100} = 0 - 4 = -4 \), a negative value, so there is no increase at all, ruling this option out.
  2. 4% decrease: The same substitution gives a net change of exactly \( -4 \), meaning expenditure falls by 4%, which matches this option precisely.
  3. 5% increase: Since the formula produces a negative net change, not a positive one, an increase of any size is inconsistent with the calculation.
  4. 5% decrease: The formula gives a net change of \( -4 \), not \( -5 \), so this option overstates the actual fall by one percentage point.

Applying the standard successive-percentage-change formula directly gives a net change of exactly \( -4\% \), confirming a decrease rather than an increase and ruling out the 5% figures.

Therefore, the correct answer is 4% decrease.

Was this answer helpful?
0


Questions Asked in CLAT exam