While purchasing an item, we come across various terms like cost price, marked price, discount, selling price. In order to increase the sale of goods, shopkeepers offer discounts to customers. The rebate or the offer given to the customers on the marked price of products is termed as discount. Let us have a look at how these terms are related to each other.
|3.||Tyoes of Discounts|
|4.||Solved Examples on Discount|
|5.||Practice Questions on Discount|
|6.||FAQs on Discount|
Discount is the reduction in the price of goods or services offered by shopkeepers at the marked price. This percentage of the rebate is usually offered to increase the sales or clear the old stock of goods. The List price or Marked price is the price of an article as declared by the seller or the manufacturer, without any reduction in price. Selling price is the actual price at which an article is sold after any reduction or discounts in the list price. "Off", "Reduction" are some common terms used to describe discounts. It should be noted that discount is always calculated on the Marked price (List price) of the article. The formula to calculate discount is:
Discount = List Price - Selling Price
Discount (%) = (Discount/List Price) × 100
Example: If the list price of a product is $4500, and there is a 40% discount on it, calculate the price at which the customer can buy the product.
40% discount on the list price = (40/100) × 4500
Discount ($)= 180000/100 = $1800
Therefore, Selling Price = List Price - Discount ($) = $4500 − $1800
Therefore, after the discount, the customer can buy the product for $2700.
When the price of an article is reduced and sold it means a discount has been offered. When the price reduced is expressed as a percentage, it is called a discount percentage or the discount rate. The formula to calculate the discount rate is:
Discount (%) = (List price - Selling Price)/ List Price × 100
Discount (%) = (Discount/List Price) times; 100
Discount Rate Calculation
To calculate the discount, you must have the list price (marked price) and the selling price of the product you are buying.
Example: If the list price of a book is $50, and $10 discount is offered on the book, then the discount percentage is calculated as follows.
Discount % = (Discount/List Price) × 100
List price = $50; discount = $10
Discount (%) = (10/50) × 100
Types of Discounts
Discounts are offered while we purchase an item from a seller or a manufacturer. There are three types of discounts:
- Trade Discount: This type of discount is offered by the distributor to the retailer and not to the end customer. A distributor is one who holds huge quantities of a product and offers it at a reduced price to a retailer, who runs a unit or a shop selling the product. This type of discount is offered to sell the product easily.
- Quantity Discount: If a customer buys a product in large numbers, then quantity discounts are offered. This type of discount is offered to tempt the customers to buy a product in large quantities.
- Promotional Discount: Promotional discounts are offered when a new product is to be promoted or if a stock clearance is to be done. This is usually advertised as offering something extra for buying a certain number of items. For example, 'Buy 2 Get 1 Free' is a common example of a promotional discount.
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Solved Examples on Discounts
Example 1: Find the discount received by Bob on a chair, if the selling price of the chair is $7 and the list price is $10?
Given, list price = $10 and selling price = $7.
Therefore, discount = List price - Selling price.
Discount = $10 - $7
Hence, Bob received a discount of $3.
Example 2: The price tag printed on a T-shirt showed $25, but Daniel paid $20 for it since there was a discount on it. Find the discount in percentage.
Given, list price = $25 and selling price = $20.
Therefore, discount = list price - selling price
= $25 - $20
Discount % = (Discount/List Price) × 100
= (5/25) × 100
= (1/5) × 100
Hence, Daniel got a discount of 20%.
FAQs on Discounts
What is the Meaning of Discount?
Sometimes, when an item is purchased, there is a reduction in the price of the item. The amount of money that is reduced is called the discount. In other words, discount is the rebate or the amount reduced from the list price of a commodity before selling it.
How Do You Calculate a Discount?
Discount is the difference between the marked price (list price) and the selling price of an article. Therefore, the formula used to calculate discount is: Discount = List price - selling price.
What is the Formula to Calculate Discount Rate?
The formula used to calculate the discount rate is: Discount (%) = (Discount/List Price) × 100, where the discount is the difference between the list price and the selling price.
What is Discount Rate?
The amount of money that is reduced from the list price of an item is called the discount. The percentage of this discount on the list price is called the discount rate. The formula to calculate the discount rate is: Discount % = (Discount/List Price) × 100. For example, if the list price of an item is $80, and a $10 discount is offered on the item, then the discount percent will be (10/80) × 100, which is equal to 12.5%.
What are the Types of Discounts?
There are three types of discounts - trade discounts, quantity discounts, and promotional discounts.
- Trade discounts are offered by the distributors of a product to a retail shop owner, by reducing the price of the products.
- Quantity discounts are offered to attract customers to purchase large quantities of products.
- Promotional discounts are offered while promoting the sale of a new product or for stock clearance. This is done usually by giving a tag line such as 'Buy 2, Get 1 Free'.