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# A company decreased the price of its main product by 50%

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Senior Manager
Status: D-Day is on February 10th. and I am not stressed
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Location: Kuwait
Schools: Columbia university
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Kudos [?]: 119 [1] , given: 52

A company decreased the price of its main product by 50% [#permalink]  19 Nov 2011, 11:14
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Question Stats:

64% (01:51) correct 36% (00:57) wrong based on 203 sessions
A company decreased the price of its main product by 50%. Subsequently, the number of units sold increased such that the total revenue remained unchanged. What was the ratio of the percent increase in the units sold to the percent decrease of the original price for this product?

A. 0.5
B. 1.0
C. 1.5
D. 2.0
E. 4.0
[Reveal] Spoiler: OA

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Kudos [?]: 365 [1] , given: 14

Re: a company decreased the price [#permalink]  19 Nov 2011, 11:33
1
KUDOS
For the total revenue to remain the same when the price is halved, the number of products sold must double. Therefore increase in the number of products sold is 100%

=> The required ratio = 100%/50% = 2.0

Option (D)
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Kudos [?]: 47376 [1] , given: 7123

Re: A company decreased the price of its main product by 50% [#permalink]  26 Mar 2012, 00:17
1
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Expert's post
manalq8 wrote:
A company decreased the price of its main product by 50%. Subsequently, the number of units sold increased such that the total revenue remained unchanged. What was the ratio of the percent increase in the units sold to the percent decrease of the original price for this product?

A. 0.5
B. 1.0
C. 1.5
D. 2.0
E. 4.0

Nice explanation above by GyanOne.

One can also use plug-in method: consider the price of the product to be $10 and the units sold at that price to be 1 --> revenue=$10*1=$10; If we decrease the price by 50% from$10 to \$5 then in order the revenue to remain the same 2 units must be sold which is 100% increase in sales (from 1 to 2).

Hence the ratio is 100%/50%=2.

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Re: A company decreased the price of its main product by 50% [#permalink]  18 Nov 2013, 05:57
1
KUDOS
Expert's post
sarahmichalmoore wrote:
I'm confused. Can someone please help me understand why the ratio is 100/50? I get that the quantity halved and the price doubled. But I don't get why the final ratio is a 2 instead of a 1.

This is my reasoning with number:

Initial price= 100
Initial Units=100
x=new quantity

(100)(100)=10,000
(.5)(100)(x)=10,000
x=200 (new quantity)

Quantity percent increase=
(200-100/100)(100)=100% increase

Price decrease=
(100-50/50)=100% decrease

100/100=1

I know this is wrong, but can someone please help me understand why?

Is the price decrease from 100 to 50 a 100% decrease? It's 50% decrease: (100-50)/100=0.5.

Hope it's clear.
_________________
Senior Manager
Status: D-Day is on February 10th. and I am not stressed
Affiliations: American Management association, American Association of financial accountants
Joined: 12 Apr 2011
Posts: 277
Location: Kuwait
Schools: Columbia university
Followers: 4

Kudos [?]: 119 [0], given: 52

Re: a company decreased the price [#permalink]  19 Nov 2011, 13:37
Thank you good and easy one. for some reason i couldn't solve it, maybe i was stressed while taking the test. thanks again
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Manager
Joined: 27 Oct 2011
Posts: 191
Location: United States
Concentration: Finance, Strategy
GMAT 1: Q V
GPA: 3.7
WE: Account Management (Consumer Products)
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Kudos [?]: 69 [0], given: 4

Re: a company decreased the price [#permalink]  25 Mar 2012, 17:23
Price decreased so quantity must increase so the net effect of the 50% decrease and % increase in quantity must equal 1. And that is 200% increase. We are looking for the net % increase which is 100% increase and then take the ratio of that which is 100%/50% = 2.
D
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Concentration: Technology, Strategy
GMAT 1: 710 Q49 V36
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WE: Information Technology (Computer Software)
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Kudos [?]: 287 [0], given: 22

Re: A company decreased the price of its main product by 50% [#permalink]  26 Mar 2012, 00:22
In such questions it is always easier to chose random values and solve the question.
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GMAT Date: 01-19-2013
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Kudos [?]: 1 [0], given: 15

Re: A company decreased the price of its main product by 50% [#permalink]  30 Dec 2012, 16:56
I used algebraical approach:
1) p1=p2
We know that p1q1=p2q2, let's apply here condition (1) ===> 2p2q1=p2q2. It means that 2q1=q2 or q2/q1=2
Manhattan CAT2 consider this question 700-800 which is not true.
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Intern
Joined: 14 Sep 2013
Posts: 2
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Kudos [?]: 0 [0], given: 2

Re: A company decreased the price of its main product by 50% [#permalink]  18 Nov 2013, 05:53
I'm confused. Can someone please help me understand why the ratio is 100/50? I get that the quantity halved and the price doubled. But I don't get why the final ratio is a 2 instead of a 1.

This is my reasoning with number:

Initial price= 100
Initial Units=100
x=new quantity

(100)(100)=10,000
(.5)(100)(x)=10,000
x=200 (new quantity)

Quantity percent increase=
(200-100/100)(100)=100% increase

Price decrease=
(100-50/50)=100% decrease

100/100=1

I know this is wrong, but can someone please help me understand why?
Intern
Joined: 14 Sep 2013
Posts: 2
Followers: 0

Kudos [?]: 0 [0], given: 2

Re: A company decreased the price of its main product by 50% [#permalink]  18 Nov 2013, 12:14
Bunuel wrote:
sarahmichalmoore wrote:
I'm confused. Can someone please help me understand why the ratio is 100/50? I get that the quantity halved and the price doubled. But I don't get why the final ratio is a 2 instead of a 1.

This is my reasoning with number:

Initial price= 100
Initial Units=100
x=new quantity

(100)(100)=10,000
(.5)(100)(x)=10,000
x=200 (new quantity)

Quantity percent increase=
(200-100/100)(100)=100% increase

Price decrease=
(100-50/50)=100% decrease

100/100=1

I know this is wrong, but can someone please help me understand why?

Is the price decrease from 100 to 50 a 100% decrease? It's 50% decrease: (100-50)/100=0.5.

Hope it's clear.

yes it is. I made a very silly mistake. Thank you so much for clarifying!
Manager
Joined: 21 Oct 2013
Posts: 194
Location: Germany
GMAT 1: 660 Q45 V36
GPA: 3.51
Followers: 0

Kudos [?]: 22 [0], given: 19

Re: A company decreased the price of its main product by 50% [#permalink]  02 Jun 2014, 22:44
I also used an algebraic approach:

initial revenue: p * u = r (p = price; u = units; r= revenue)

now we have a decrease of 0.5 in p and an increase of x in u. r remains the same:

0.5p * (x*u) = r

now equalize:

0.5p * (x*u) = p * u ==> p/0.5p = x*u/u ==> 0.5p=x ==> x = 2 --> here's our ratio!

dunno if this it the right approach but it worked for me lol.
Re: A company decreased the price of its main product by 50%   [#permalink] 02 Jun 2014, 22:44
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# A company decreased the price of its main product by 50%

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