Q42. If the tax on an item is increased by 33% and its consumption is decreased by 23%, then what is the approximate effect on the

2 thoughts on “Q42. If the tax on an item is increased by 33% and its consumption is decreased by 23%, then what is the approximate effect on the”

1. Solution :–

   Let

   • Initial tax = Rs.10x
   • Initial consumption = Rs.10y .

   so,

   → Tax * consumption = Revenue

   → 10x * 10y = Rs. 100xy

   now,

   → New tax = (10x * 133/100) = Rs.13.3x

   → New consumption = (10y * 77)/100 = 7.7y .

   then,

   → New revenue = 13.3x * 7.7y = Rs.102.4xy .

   therefore,

   → Revenue increased by = (2.4xy * 100)/100xy) = 2.4% (B) (Ans.)

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2. Given info : If the tax on an item is increased by 33% and its consumption is decreased by 23%.

   To find : The approximate effect on the revenue is ..

   solution : we know, revenue = consumption × tax amount per commodity

   if we assume consumption is 100 unit and tax amount per commodity is 100 unit

   then, revenue = 100 × 100 = 10,000

   now tax is increased by 33 %

   so, new tax = 100 + 33 = 133

   consumption is decreased by 23 %

   so, new consumption = 100 – 23 = 77

   now revenue = 133 × 77 = 10,241

   now percentage change in revenue = (10,241 – 10,000)/10,000 × 100

   = 241/100

   = 2.41 ≈ 2.4 % increase

   Therefore the approximate effect on the revenue is 2.4 % (increase).

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