The tax on commodity is reduced by 20%. Due to reduction in tax, the consumption is increased by 12%. Find the effect on revenue. |
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a) |
89.6% decrease |
b) |
10.40% decrease |
c) |
5.2% decrease |
d) |
44.8% increase |

The tax on commodity is reduced by 20%. Due to reduction in tax, the consumption is increased by 12%. Find the effect on revenue. |
|||||||

a) |
89.6% decrease |
b) |
10.40% decrease |
c) |
5.2% decrease |
d) |
44.8% increase |

1 Answer

127 votes

Here consumption increases by 12% and tax reduced by 20%

New revenue=new tax rate × new consumption rate=80%×112% of the original

=of the original

∴ % effect=the revenue change=100-89.6=10.4%

127 votes

127