In a developing country, the price of a stock is directly proportional to the reciprocal of the inflation in the country, which is in turn directly proportional to the local diesel prices. The price of the stock is 100 currency units when the inflation is 10 units and when the inflation is 12 units, the local price of the diesel is 60 currency units. By how many currency units should the local diesel price fall so that the price of the stock, which is currently at 200 currency units, increases by 25 percent?a)5b)10c)25d)30e)40Correct answer is option 'A'. Can you explain this answer?

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In a developing country, the price of a stock is directly proportional to the reciprocal of the inflation in the country, which is in turn directly proportional to the local diesel prices. The price of the stock is 100 currency units when the inflation is 10 units and when the inflation is 12 units, the local price of the diesel is 60 currency units. By how many currency units should the local diesel price fall so that the price of the stock, which is currently at 200 currency units, increases by 25 percent?

a)
5
b)
10
c)
25
d)
30
e)
40

Correct answer is option 'A'. Can you explain this answer?

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Verified Answer

In a developing country, the price of a stock is directly proportional...

Given:

where x is a constant and P and I are price of the stock and Inflation respectively

Inflation α Local Diesel prices
- I = bD, where b is a constant and D is the local diesel price.
P = 100 when I = 10
I = 12 when D = 60

To Find: By how many currency units should the local diesel price fall so that the price of the stock, which is currently at 200 currency units, increases by 25 percent?

Current Price stock = 200 currency units.
Increased Price stock = 200 *1.25 = 250 currency units

Approach:

Let the current local price of diesel be D and the local price of Diesel at which the price of the stock increases by 25 percent be D’. So, the local Diesel price should fall by (D – D’) units
- So, we should find the value of D and D’ at the current price and the increased price of the stocks.
We need to find the relation between the price of a stock and the diesel prices
- We know the relation between price of a stock and the inflation, which is given by
- We also know the relation between Inflation and local diesel prices, which is given by I = bD
Using the above relations, we will establish a relation between price of a stock and the local diesel prices.
Once, we establish a relation between price of a stock and the local diesel prices, we will need to find the values of constants b and x to calculate the change needed in local diesel prices when the price of a stock increases by 25 percent.
- As we are given the price of a stock for a particular level of inflation, we can find the value of x using the relation
- Similarly, as we are given the value of inflation for a particular level of local diesel prices, we can find the value of b using the relation I = bD

Working out:

2. Calculating values of x and b

Price of a stock = 100 when inflation = 10
- Using the relation we can write

which gives us x = 1000

Inflation = 12 when the local diesel prices = 60
- Using the relation I = bD, we can write 12 =b *60, i.e. b = 1/5

4. So, the fall in local diesel price = 25 – 20 = 5
Hence, the local diesel price should fall by 5 currency units so that the price of
the stock should increase by 25% from 200.

Answer : A

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Most Upvoted Answer

In a developing country, the price of a stock is directly proportional...

To solve this problem, let's break it down into smaller steps:

Step 1: Determine the initial relationship between the stock price and the reciprocal of inflation. We are given that the stock price is directly proportional to the reciprocal of inflation. So, we can write this relationship as:

Stock Price ∝ 1/Inflation

Step 2: Determine the relationship between inflation and diesel prices. We are given that inflation is directly proportional to diesel prices. So, we can write this relationship as:

Inflation ∝ Diesel Prices

Step 3: Combine the two relationships. We can substitute the relationship between inflation and diesel prices into the relationship between the stock price and inflation to get the relationship between the stock price and diesel prices:

Stock Price ∝ 1/(Diesel Prices)

Step 4: Use the given information to find the initial value of diesel prices when the stock price is 100 currency units and the inflation is 10 units. We can set up a proportion to solve for the initial diesel price:

100/1 = x/10

Solving this proportion, we find that x = 1000 currency units.

Step 5: Use the given information to find the new value of diesel prices when the stock price is 200 currency units and the inflation is 12 units. Again, we can set up a proportion to solve for the new diesel price:

200/1 = x/12

Solving this proportion, we find that x = 2400 currency units.

Step 6: Calculate the change in diesel prices. The change in diesel prices is the difference between the initial and new diesel prices:

2400 - 1000 = 1400 currency units

Step 7: Calculate the percentage change in the stock price. The percentage change in the stock price is given as 25%. We can calculate the actual change in the stock price by multiplying the current stock price (200) by the percentage change (25%):

200 * 0.25 = 50 currency units

Step 8: Determine the change in diesel prices needed to achieve the desired increase in the stock price. We need to find the change in diesel prices that corresponds to a 50 currency unit increase in the stock price. We can set up a proportion to solve for this change:

50/1 = x/1400

Solving this proportion, we find that x = 5 currency units.

Therefore, the local diesel price should fall by 5 currency units in order for the price of the stock to increase by 25 percent.

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In a developing country, the price of a stock is directly proportional to the reciprocal of the inflation in the country, which is in turn directly proportional to the local diesel prices. The price of the stock is 100 currency units when the inflation is 10 units and when the inflation is 12 units, the local price of the diesel is 60 currency units. By how many currency units should the local diesel price fall so that the price of the stock, which is currently at 200 currency units, increases by 25 percent?a)5b)10c)25d)30e)40Correct answer is option 'A'. Can you explain this answer? for GMAT 2025 is part of GMAT preparation. The Question and answers have been prepared according to the GMAT exam syllabus. Information about In a developing country, the price of a stock is directly proportional to the reciprocal of the inflation in the country, which is in turn directly proportional to the local diesel prices. The price of the stock is 100 currency units when the inflation is 10 units and when the inflation is 12 units, the local price of the diesel is 60 currency units. By how many currency units should the local diesel price fall so that the price of the stock, which is currently at 200 currency units, increases by 25 percent?a)5b)10c)25d)30e)40Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for GMAT 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In a developing country, the price of a stock is directly proportional to the reciprocal of the inflation in the country, which is in turn directly proportional to the local diesel prices. The price of the stock is 100 currency units when the inflation is 10 units and when the inflation is 12 units, the local price of the diesel is 60 currency units. By how many currency units should the local diesel price fall so that the price of the stock, which is currently at 200 currency units, increases by 25 percent?a)5b)10c)25d)30e)40Correct answer is option 'A'. Can you explain this answer?.

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