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Percentages - March 20, 2006

The GMAT Math sample question for the day is from the topic Percentages in Arithmetic.

Question
If the price of gasoline increases by 25% and Ron intends to spend only 15% more on gasoline, by how much % should he reduce the quantity of petrol that he buys?

A. 10%
B. 12.5%
C. 8%
D. 12%
E. 6.67%

The correct choice is (C) and the correct answer is 8%.

Explanatory Answer
Let the price of 1 litre of gasoline be $x and let Ron initially buy 'y' litres of gasoline.
Therefore, he would have spent $xy on gasoline.

When the price of gasoline increases by 25%, the new price per litre of gasoline is 1.25x.

Ron intends to increase the amount he spends on gasoline by 15%.
i.e., he is willing to spend xy + 15% of xy = 1.15xy

Let the new quantity of gasoline that he can get be 'q'.
Then, 1.25x * q = 1.15xy
Or q = = 0.92y.

As the new quantity that he can buy is 0.92y, he gets 0.08y lesser than what he used to get earlier.
Or a reduction of 8%.

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