Question

If the tax on tea is reduced by 10% by how much percent must the consumption increases
so that there is an increase of 8% in the revenue?​

Answer 1

Given info : the tax on tea is reduced by 10 %.

To find : by how much percent must the consumption increase so that there is an increment of 8% in the revenue.

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

let consumption is 100 and tax is 100

then revenue would be , R = 100 × 100 = 10,000

now tax on tea is reduced by 10% i.e., T = 90

and revenue is increased by 8% i.e., R = 10000 + 8% of 10000 = 10000 + 800 = 10800

now consumption = revenue/tax amount per commodity

= 10800/90 = 120

now percentage change in revenue =(120 - 100)/100 × 100 = 20%

Therefore percentage change in revenue must be 20%