Let's say we had a square that had a side length of 8 units.
The area would be 8*8 = 64 square units.
If we multiply each side of the square by 1/4, then we get (8)*(1/4) = 8/4 = 2. The side length is now 2. The area is going to be 2*2 = 4.
Compare the two areas: 64 and 4
The ratio is 4/64 = 1/16
It's no coincidence that 1/16 is the result of 1/4 squared. In other words, (1/4)^2 = 1/16
This idea applies to any 2D shape. It doesn't have to be a square. So the circle's new area will be 1/16 of the old area
New circle area = (1/16)*(old circle area)