selim wrote:

A trader normally makes a profit of 40% on items he sells. If he reduces the price by 10%, his sales increase by 40%. Let x be the total profit when he doesn't reduce the price and y be the total profit when he reduces the price. What is the ratio of x to y ?

A) 1.28

B) 7.8

C) 1.11

D) 0.91

E) 0.25

I am assuming that we are talking about the 40% increase in sales of volume, not sales revenue

Let's say normally he sells 100 items of $10 each on which he makes a profit of 4% i.e. a profit of 100*4 = $400 = x

When he gives a discount of 10%, his effective profit is

40 - 10 + (40)*(-10)/100 = 26% which is $2.6 in case of $10 CP of each item.

But he sells 140 items.

So his profit = 140*2.6 = 364 = y

x/y = 1.099 which is closest to 1.11 but this option is certainly misleading.

Had (C) been 1.1, it would have been fine (rounded up) but I am not happy with 1.11.

It would have been far better had the question asked for y/x to get 0.91 as the answer.

Besides, the calculations involved are not GMAT-like. What is the source of this question?

_________________

Karishma

Veritas Prep GMAT Instructor

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