OFFICIAL EXPLANATIONHi All,
We're told that a city council plans to increase local sales taxes on goods from 5% to 8% and that once the plan is enacted, the total price with the 8% sales tax on a specific set of goods will be $1,944. We're asked for the price of these goods with the original 5% sales tax. Since this question gives us all of the 'numbers' involved, it's essentially just about doing a certain amount of Arithmetic. That having been said, in these types of questions, that math can often be done in a couple of different ways (meaning that some approaches are faster and easier than others) - and you can often use the answer choices to your advantage.
To start, It's interesting that the 8% increase would lead to EXACTLY $1,944.... without anything following the decimal point. This means that the original price of the goods (BEFORE taxes) is almost certainly a 'round number.' Looking at the answer choices, there's only one "nice, round number", so I'd be interested in seeing what an 8% increase of that number would be...
An 8% increase of 1800 --> 1800 + (.08)(1800) = 1800 + 144 = 1944. This is an EXACT MATCH for the $1,944 that we were given, so we now know the 'starting price' of the goods. Finding a 5% increase will be fairly straight-forward...
A 5% increase of 1800 --> 1800 + (.05)(1800) = 1800 + 90 = $1,890
Final Answer:
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Rich
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