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    gmat question

    This is GMT question the answer is D. but I am little bit confused if someone know please solve this question I will be grateful to you .

    Q - If the value of a piece of property decreases by 10 % while the tax rate on the property increases by 10 %, what is the effect on the taxes?

    a) Taxes increases by 10 %

    b) Taxes increases by 1 %

    c) No change

    d) Taxes decreases by 1 %

    e) Taxes decreases by 10 %

    Let say Price is P,
    Price increase rate is I = 10%
    Tax is T = 10%

    then formula to calculate the tax should be

    = [ P - ( P x I ) ] x T

    If you caclulate the tax using this formula and then the simple tax calculating formula i.e.

    = P x T

    then there should be difference of 1% from actual price.

    I hope it makes some sense.


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