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When the price of a product was increased by 15%, the number of items sold was decreased by 20%. What was the net effect?
- a)10% gain
- b)6% l oss
- c)8% loss
- d)4% gain
Correct answer is option 'C'. Can you explain this answer?
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Net Effect of Price Increase and Decreased Sales
To determine the net effect of the price increase and decreased sales on the overall outcome, we need to calculate the individual effects first and then combine them.
1. Price Increase
When the price of a product is increased by 15%, it means the new price is 115% of the original price. Let's assume the original price is 100 units.
New Price = Original Price + (Original Price x Price Increase Percentage)
= 100 + (100 x 15/100)
= 100 + 15
= 115 units
2. Decreased Sales
When the number of items sold is decreased by 20%, it means the new sales quantity is 80% of the original sales quantity. Let's assume the original sales quantity is 100 units.
New Sales Quantity = Original Sales Quantity x (1 - Sales Decrease Percentage)
= 100 x (1 - 20/100)
= 100 x 0.8
= 80 units
3. Net Effect
To calculate the net effect, we need to compare the new revenue with the original revenue.
Original Revenue = Original Price x Original Sales Quantity
= 100 x 100
= 10,000 units
New Revenue = New Price x New Sales Quantity
= 115 x 80
= 9,200 units
Net Effect = (New Revenue - Original Revenue) / Original Revenue x 100
= (9,200 - 10,000) / 10,000 x 100
= -800 / 10,000 x 100
= -8%
Therefore, the net effect of the price increase by 15% and the decrease in sales by 20% is an 8% loss. Option C, 8% loss, is the correct answer.
To determine the net effect of the price increase and decreased sales on the overall outcome, we need to calculate the individual effects first and then combine them.
1. Price Increase
When the price of a product is increased by 15%, it means the new price is 115% of the original price. Let's assume the original price is 100 units.
New Price = Original Price + (Original Price x Price Increase Percentage)
= 100 + (100 x 15/100)
= 100 + 15
= 115 units
2. Decreased Sales
When the number of items sold is decreased by 20%, it means the new sales quantity is 80% of the original sales quantity. Let's assume the original sales quantity is 100 units.
New Sales Quantity = Original Sales Quantity x (1 - Sales Decrease Percentage)
= 100 x (1 - 20/100)
= 100 x 0.8
= 80 units
3. Net Effect
To calculate the net effect, we need to compare the new revenue with the original revenue.
Original Revenue = Original Price x Original Sales Quantity
= 100 x 100
= 10,000 units
New Revenue = New Price x New Sales Quantity
= 115 x 80
= 9,200 units
Net Effect = (New Revenue - Original Revenue) / Original Revenue x 100
= (9,200 - 10,000) / 10,000 x 100
= -800 / 10,000 x 100
= -8%
Therefore, the net effect of the price increase by 15% and the decrease in sales by 20% is an 8% loss. Option C, 8% loss, is the correct answer.
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When the price of a product was increased by 15%, the number of items sold was decreased by 20%. What was the net effect?a)10% gainb)6% l ossc)8% lossd)4% gainCorrect answer is option 'C'. Can you explain this answer?
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