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Question
The income of a broker remains unchanged though the rate of commission is increased from 4% to 5%. Find the percentage reduction in the value of the business.
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Solution
Let the initial value of the business be ₹ 100.
Original rate of commission = 4%.
∴ The original income of the agent = `100 xx 4/100` = ₹ 4
Let the new value of the business be ₹ x
New rate of commission = 5%
∴ New income of the agent = `x xx 5/100 = (5x)/100`
However, it is given that the original income and new income of agent is the same.
∴ 4 = `(5x)/100`
∴ 5x = 400
∴ x = 80
∴ New value of business is ₹ 80.
Reduction in business
`= ("Old value" - "New value")/"Old value" xx 100`
`= (100 - 80)/100 xx 100`
= 20 %
There is 20% reduction in the value of the business.
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