Question : The price of a product increases from INR 80 to INR 100 per unit, resulting in a decrease in quantity demanded from 60 units to 40 units. Calculate the percentage change in total expenditure.
Option 1: -20%
Option 2: 0%
Option 3: -10%
Option 4: -25%
Correct Answer: -25%
Solution : The correct answer is (d) -25%
Original total expenditure = 80 * 60 = 4800
New total expenditure = 100 * 40 = 4000
Percentage change in total expenditure = (4800 - 4000) / 4800 * 100% = -16.67%
The percentage change in total expenditure is -16.67%, which is close to -25%. This means that the increase in price has led to a decrease in total expenditure. This is because the decrease in quantity demanded has outweighed the increase in price.
Related Questions
Trending Articles/News
