Correct Answer - Option 2 : 20%
Concept used:
The product of consumption and price is equal to total expenditure.
Calculation:
Let the initial price of petrol be 100x and initial travel be 10y.
⇒ Initial expenditure = 100x × 10y = 1000xy ----(1)
When the price of petrol is increased by 25%,
The new price of the petrol = 100x + 25% of 100x = 125x
Now, let new travel be T.
As A/Q expenses cannot change
⇒ 125x × T = 1000xy [From (1)]
⇒ T = 1000xy/125x = 8y
⇒ New travel is 8y
Reduction in travel = 10y - 8y = 2y
Reduction in travel in % = (2y/10y) × 100 = 20%
∴ one must reduced travel by 20%.
