The tax on a commodity is diminished by 20% and its consumption increases by 15%. Find the effect on revenue.
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t looks like question assumes
revenue = consumption × tax amount per commodity
Let consumption = 100, tax amount per commodity = 100
Revenue = 100 × 100 = 10000
new consumption = 100(100+15)100=115100(100+15)100=115
New tax amount per commodity = 100(100−20)100=80100(100−20)100=80
New revenue = 115 × 80 = 9200
Decrease in revenue = 10000 - 9200= 800
Percentage decrease in revenue = 800×10010000=8%
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