A spends 60% of his income. His income increased by 20% and his expenditure increased by 25%. What is the change in savings?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. Increase by 12.5%.
Let the income of A be 100 units
Expenditure of A = 60% of 100 = 60 units
Savings of A = 100 - 60 = 40 units
Change in income = 100 × 1.2 = 120 units
Change in expenditure = 60 × 1.25 = 75 units
Savings = 120 - 75 = 45 units
Change in saving percentage = (45 - 40)/40 × 100 = 1/8 × 100 = 12.5% increase