The tax on a commodity is diminished by 20% and its consumption increased by 15%. the effect on revenue is?
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Let the tax =10 and consumption =10.
Expenditure = 10*10 = 100.
New tax = 10-10*20/100 = 10-2 = 8.
New consumption=10+10*15/100= 10+1.5= 11.5
New expenditure= 8×11.5 = 92
Revenue will be decreased by 8%.
Hope it helps.
Expenditure = 10*10 = 100.
New tax = 10-10*20/100 = 10-2 = 8.
New consumption=10+10*15/100= 10+1.5= 11.5
New expenditure= 8×11.5 = 92
Revenue will be decreased by 8%.
Hope it helps.
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