How do I reduce the size of a pdf file that contains images?

You can use gs - GhostScript (PostScript and PDF language interpreter and previewer) as follows:

Set pdfwrite as output device by -sDEVICE=pdfwrite
Use the appropriate -dPDFSETTINGS.

From Documentation:
-dPDFSETTINGS=configuration
Presets the "distiller parameters" to one of four predefined settings:
- /screen selects low-resolution output similar to the Acrobat Distiller "Screen Optimized" setting.
- /ebook selects medium-resolution output similar to the Acrobat Distiller "eBook" setting.
- /printer selects output similar to the Acrobat Distiller "Print Optimized" setting.
- /prepress selects output similar to Acrobat Distiller "Prepress Optimized" setting.
- /default selects output intended to be useful across a wide variety of uses, possibly at the expense of a larger output file.
-o option to output file which also set -dNOPAUSE and -dBATCH (see Interaction-related parameters)

Example:

$ du -h file.pdf 
27M file.pdf

$ gs -sDEVICE=pdfwrite -dPDFSETTINGS=/ebook -q -o output.pdf file.pdf

$ du -h output.pdf 
900K    output.pdf

Here -q suppress normal startup messages, and also do the equivalent of -dQUIET which suppresses routine information comments

ps2pdf input.pdf output.pdf

I got the answer from ask ubuntu and it worked for me. It actually reduced 18.1Mb to 1.0Mb

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