Ramana spends 75% of his income. His income is increased by 25% and he increases his expenditure by 10%. By what percentage are his savings increased?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. 70%.
Let the income of Ramana be 100x.
According to the given question,
Expenditure of Ramana = 75% of income
⇒ 75% of 100x = 75x
Savings of Ramana = Income - Expenditure
⇒ 100x - 75x = 25x
His income increased by 25%,
⇒ New income = 125% of 100x
⇒ New income = 125x
His expenditure is increased by 10%,
⇒ New expenditure = 110% of 75x
⇒ New expenditure = 82.5x
Now, new savings = New income - New expenditure
⇒ New savings = 125x - 82.5x
⇒ New savings = 42.5x
Increase in savings = (New savings - Old savings)/old savings × 100
⇒ (42.5x - 25x)/25x × 100
⇒ 17.5x/25x × 100 = 70%
Hence the percentage increase in the savings is 70%.