Correct Answer - Option 2 : 26.6%

**Given:**

Initial Expenditure = 75%

Initial Savings = 25%

Increase in income = 25%

Increase in savings = 20%

**Concept:**

To solve this type of question, consider the initial income to be 100. Then, calculate the rest of the data using simple % rules.

**Formula used:**

% increase/Decrease = [(Final value – Initial value)/initial value] × 100

**Calculation:**

Let the income be 100x.

Expenditure = 75% of 100x = 75x

Savings = 25% 0f 100x = 25x

% increase in come = 25%

New income = 125x

% increase in savings = 20% 0f 25x = 5x

∴ New savings = 25x + 5x = 30x

⇒ New expenditure = New income – new savings = 125x – 30x = 95x

∴ % increase in expenditure = [(95x – 75x)/75x] × 100

= 80/3

= 26.6%