The monthly income of a person is ₹25,000. He spends 80% of his income and saves the rest. His nominal income and his nominal spending both increase by 10%. What will be his new savings?
Answer & explanation
Correct answer: option 1
Let initial income = 25000
Expenditure = 80% of 25000
= \(\frac{4}{5}\) × 25000
= 20000
Saving = 25000 - 20000 = 5000
New income = 25000 + \(\frac{1}{10}\)× 25000 = 27500
New expenditure = 20000 + \(\frac{1}{10}\)× 20000 = 22000
New Saving = 27500 - 22000 = 5500