Explanation:

Let the price of 1 litre of diesel be Rs.x

and let Karthik initially buy 'y' litres of diesel.
Therefore, he would have spent Rs. xy on diesel.

When the price of diesel increases by 25%,

the new price per litre of diesel is 1.25x.

Karthik intends to increase the amount he spends on diesel by 15%.
i.e., he is willing to spend xy + 15% of xy = 1.15xy

Let the new quantity of diesel that he can get be 'q'.
Then, 1.25x x q = 1.15xy
Or q = (1.15/1.25)y = 0.92y.

As the new quantity that he can buy is 0.92y,

he gets 0.08y lesser than what he used to get earlier.

Or a reduction of 8%.

Hence, option 3 is the correct answer.