An item's price rises by 15%. To keep spending unchanged, by what percentage must a consumer reduce consumption?
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Answer: B. 13 1/23 %
Explanation
A fifteen percent price increase raises the total cost index of goods from one hundred to one hundred fifteen units. To maintain constant expenditure, the consumer must reduce consumption proportional to the new higher price baseline. Dividing fifteen by one hundred fifteen and multiplying by one hundred yields the exact fraction thirteen and one twenty-third percent. Price elasticity of demand measures how consumer purchasing quantities respond to shifts in market price levels. Maintaining a fixed budget during inflation requires scaling back volume consumption inverse to price increases. Percentage reduction formulas compare the desired savings amount directly against the new elevated total cost.
Option A represents an incorrect fraction calculation that fails to use the proper inflated denominator base. Option C is a common distractor representing the reciprocal reduction formula applicable to different initial price changes. Option D incorrectly assumes a linear one-to-one trade-off, ignoring the compounding effect of the price rise denominator.
- Subject
- Mathematics
- Category
- Mathematics
- Topic
- —
- Difficulty
- medium
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