tkorzhan1995 Most of the explanations given here are a little time consuming and calculation intensive , so thought of suggesting a shortcut approach to solve this question in less than a minute.
For the first quarter of 1980, the profits of a certain food-market chain amounted to $49,350,000. If this figure is 5 percent higher than the profits for the first quarter of 1979, what was the amount of the increase?
A. $350,000
B. $2,350,000
C. $2,467,500
D. $4,688,250
E. $4,700,000This Question is clearly based on percentage increase concept. In this case, an initial value is increased by 5 % to get a final value.
Let's assume that the initial value be 100 and it is increased by 5% , i.e 100 is increased by 5 and we will get 105 as the final value.
So in order to get back to 100 from 105,
by what percentage of final value should we decrease ?If you get the answer to this question, then 90 % of the task is done .
Is it 5 % ? No, clearly not . But we know that 105 has to be decreased by 5 to get 100.
So the percentage decrease should be 5 /105 * 100 or the amount to be decreased = \(\frac{5}{105} \)* final value = \(\frac{5}{105}\) *105 = 5
So lets summarize what we have discussed.
If an initial value is increased by 5 % to get a final value, then the amount increase here is 5 % of initial value or \(\frac{5}{105}\) of final value i.e \(\frac{1}{21 }\) of final value.
Lets apply the above discussed concept here in this question.
The amount increase = \(\frac{1}{21}\) * Final value = \(\frac{1}{21}\) * $49,350,000 = 23...
You don't need to do the entire division, first 2 digit of the quotient is enough to figure the correct answer as only one answer option starts with 23...
Option B is the right answer.If you get any different value as percentage increase instead of 5 , then assume initial value as 100 and find the corresponding percentage decrease needed to bring the final value back to 100.
Thanks,
Clifin J Francis,
GMAT Quant SME