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If prices are reduced 25% and sales increase 20%, what is the net eff

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Re: If prices are reduced 25% and sales increase 20%, what is the net eff [#permalink]
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chandan1988 wrote:
Let the price be \$100
And sales be 100 units

New Price = \$75
New sales = 120

Therefore
{(75*120)-(100*100)}/(100*100)
=- 10%
So answer should be E .
Decrease by 10%

To win the Game , Be in the Game

please tell me why we subtracted (75*120) from (100*100).. is this some kinda rule.. cant we subtract (100*100) from (75*120)

You can subtract anything from anything, but it should be clear in your mind what does the end result mean.
1. If you do the way it is done in the example then you must know that the end result means that it shows the increase/decrease of 2nd case with respect to first one.
2. If you do it the opposite then you must know that it shows increase/decrease of 1st case with respect to second one.
And the question asks us the answer that is shown by number 1, so we do like this to save time and avoid confusion.

Hope this helps.
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Re: If prices are reduced 25% and sales increase 20%, what is the net eff [#permalink]
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Multiplier method.

25% discount = 0.75 multiplier
20% increase = 1.2 multiplier

1.2 * 0.75 = 0.90 [If the product of two multipliers is less than 1, it is a decrease]

1-0.90 = 10%
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Re: If prices are reduced 25% and sales increase 20%, what is the net eff [#permalink]
If prices are reduced 25% and sales increase 20%, what is the net effect on gross receipts?

(A) They increase by 5%.

(B) They decrease by 5%.

(C) They remain the same.

(D) They increase by 10%.

(E) They decrease by 10%.

I thought this means that Sales=Price*Gross Receipts therefore 1.2S=0.75P*GR which leads to new GR of 1.6, which is 60% higher than current GR. Still scratching head as to where I went wrong
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Re: If prices are reduced 25% and sales increase 20%, what is the net eff [#permalink]
chandan1988 wrote:
Let the price be \$100
And sales be 100 units

New Price = \$75
New sales = 120

Therefore
{(75*120)-(100*100)}/(100*100)
=- 10%
So answer should be E .
Decrease by 10%

To win the Game , Be in the Game

please tell me why we subtracted (75*120) from (100*100).. is this some kinda rule.. cant we subtract (100*100) from (75*120)
Intern
Joined: 14 Sep 2021
Posts: 7
Own Kudos [?]: 3 [0]
Given Kudos: 9
Location: Pakistan
Re: If prices are reduced 25% and sales increase 20%, what is the net eff [#permalink]
piyushluniya wrote:
chandan1988 wrote:
Let the price be \$100
And sales be 100 units

New Price = \$75
New sales = 120

Therefore
{(75*120)-(100*100)}/(100*100)
=- 10%
So answer should be E .
Decrease by 10%

To win the Game , Be in the Game

please tell me why we subtracted (75*120) from (100*100).. is this some kinda rule.. cant we subtract (100*100) from (75*120)

Hi
You can subtract anything from anything, but it should be clear in your mind what does the end result mean.
1. If you do the way it is done in the example then you must know that the end result means that it shows the increase/decrease of 2nd case with respect to first one.
2. If you do it the opposite then you must know that it shows increase/decrease of 1st case with respect to second one.
And the question asks us the answer that is shown by number 1, so we do like this to save time and avoid confusion.

Hope this helps.