Cooking oil prices climb by 25%. What percentage reduction must a household implement to maintain identical spending________?
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Answer: B. 20 %
Explanation
A twenty five percent price increase raises the index price from one hundred to one hundred twenty five. To maintain identical spending consumption must be reduced by the price increase divided by new price. Dividing twenty five by one hundred twenty five converts into a required twenty percent consumption reduction. Inverse price and consumption relationships ensure total expenditure remains constant during inflation. Percentage reduction formulas divide the price hike amount by the new higher price baseline. A twenty five percent price rise requires a twenty percent cutback to preserve household budgets.
Household budgeting requires adjusting consumption levels when commodity and utility prices experience inflation. Economists study consumer demand elasticity in response to sudden price spikes in essential goods. Understanding spending preservation formulas helps families manage living expenses during economic shifts. Option A suggests fifteen percent which fails to compensate fully for the price increase. Option C suggests twenty five percent which incorrectly assumes symmetrical percentage adjustments. Option D suggests thirty percent which overcorrects for the initial price hike.
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- Mathematics
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- Mathematics
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- medium
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