If the price of a commodity increases by 20%, its demand drops by 20%. Then how it will affect the expenditure?

According to the NCERT Introductory Microeconomics (Chapter 2: Theory of Consumer Behaviour), the relationship between price changes and total expenditure is governed by the Price Elasticity of Demand ($E_d$Ed​).

We use the Percentage Method to calculate elasticity:

$$E_d = \dfrac{\% \text{ change in quantity demanded}}{\% \text{ change in price}}$$Ed​=% change in price% change in quantity demanded​

Given:
$$\% \Delta Q = 20\%$$%ΔQ=20%
$$\% \Delta P = 20\%$$%ΔP=20%

$$E_d = \dfrac{20}{20} = 1$$Ed​=2020​=1

As per the Total Expenditure Method outlined in NCERT:

When $E_d = 1$Ed​=1, the demand is Unitary Elastic.

In the case of Unitary Elasticity, the total expenditure remains constant regardless of the change in price.

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While a discrete mathematical calculation ($1.20P \times 0.80Q = 0.96PQ$1.20P×0.80Q=0.96PQ) suggests a $4\%$4% decline, the CUET/NTA framework follows the theoretical definition of the Percentage Method.

Since the percentage changes are equal, the coefficient is exactly $1$1.

Therefore, the expenditure remains unchanged.