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If the price of a commodity rises by 25%, by what percent must consumption be reduced so expenditure stays the same?
A20%
B25%
C30%
D16.67%
Answer & Solution
Correct answer: A. 20%
1. New price index = 125.
2. To keep expenditure constant, consumption × price = same.
3. New consumption = 100 / 125 = 80%; reduction = 20%.
_Source: jkchrome Percentage QB, p.3 — price-consumption pattern_
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