Revenue impact of simultaneous decreases: Due to low rainfall, the land price drops by 12% and its production falls by 4%. What is the overall percentage change in revenue (price × production)?

Introduction / Context:Revenue equals price multiplied by quantity. When both price and output change, multiply their factors to get total revenue change.

Given Data / Assumptions:

• Price decrease = 12% ⇒ factor = 0.88.
• Production decrease = 4% ⇒ factor = 0.96.
• Revenue factor = 0.88 * 0.96.

Concept / Approach:Overall percentage change = (combined factor − 1) * 100%. Product of factors captures simultaneous effects.

Step-by-Step Solution:

Verification / Alternative check:Use the approximation formula: net % ≈ −12% + −4% + (−12%)*(−4%)/100 = −16% + 0.48% = −15.52%, exactly matching.

Why Other Options Are Wrong:

• Loss of 16% ignores the positive cross-term.
• Gains are impossible since both factors fell.
• Loss of 12.48% is an arbitrary mismatch.

Common Pitfalls:Adding percentage changes directly without the interaction term; simultaneous changes require multiplying factors.

Final Answer:Loss of 15.52%