Shortcut Trick
Assume initial Income = 100, then Expenditure = 50 and Saving = 50.
Net change: Total increase in Income = 40% of 100 = 40 units.
Increase in Saving = 20% of 50 = 10 units.
Required increase in Expenditure = 40 − 10 = 30 units.
% Increase in Expenditure = (30 ÷ 50) × 100 = 60 percent.
∴ The correct answer is 60 percent.
Alternate Method
Given:
Initial Expenditure = 50% of Income
Increase in Income = 40%
Increase in Saving = 20%
Formula Used:
Income = Expenditure + Saving
Percentage Increase = [(New Value − Old Value) ÷ Old Value] × 100
⇒ Let original Income = 100 units
⇒ Original Expenditure = 50% of 100 = 50 units
⇒ Original Saving = 100 − 50 = 50 units
⇒ New Income = 100 × (1 + 40 ÷ 100) = 140 units
⇒ New Saving = 50 × (1 + 20 ÷ 100) = 60 units
⇒ New Expenditure = 140 − 60 = 80 units
⇒ Change in Expenditure = 80 − 50 = 30 units
⇒ Percentage increase in Expenditure = (30 ÷ 50) × 100 = 60%
∴ The correct answer is 60 percent.
Additional Information
Income Balance Equation
Total Income is always the sum of Expenditure and Savings. Any change in total income must be balanced by the sum of changes in its components: ΔIncome = ΔExpenditure + ΔSaving.
Percentage Change Rule
To find the percentage increase, divide the absolute increase by the original base value and multiply by 100: % Increase = (Increase ÷ Original Value) × 100.
Weighted Average Application
Income % change can also be viewed as a weighted average of Expenditure % change and Saving % change based on their initial shares of income.