Last visit was: 15 Sep 2024, 06:39 It is currently 15 Sep 2024, 06:39
Toolkit
GMAT Club Daily Prep
Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

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

SORT BY:
Tags:
Show Tags
Hide Tags
Math Expert
Joined: 02 Sep 2009
Posts: 95513
Own Kudos [?]: 658802 [1]
Given Kudos: 87262
Intern
Joined: 23 May 2015
Posts: 22
Own Kudos [?]: 23 [1]
Given Kudos: 16
Intern
Joined: 22 Aug 2017
Posts: 20
Own Kudos [?]: 7 [2]
Given Kudos: 25
Manager
Joined: 27 Nov 2015
Posts: 87
Own Kudos [?]: 39 [0]
Given Kudos: 325
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
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]
chandan1988
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)
Tutor
Joined: 16 Oct 2010
Posts: 15302
Own Kudos [?]: 68085 [1]
Given Kudos: 442
Location: Pune, India
Re: If prices are reduced 25% and sales increase 20%, what is the net eff [#permalink]
1
Kudos
Bunuel
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%.

Initial Gross receipt = Initial Price * Initial Sales

Then,
New Gross Receipt = 75% of Initial Price * 120% of Initial Sales
New Gross Receipt = 18/20 * Initial Price * Initial Sales = (9/10) * Initial Gross receipt

The new gross receipt decreases by 10% of the initial gross receipt.

Intern
Joined: 13 Jul 2020
Posts: 41
Own Kudos [?]: 29 [1]
Given Kudos: 76
Location: Nepal
GMAT 1: 660 Q50 V29
GMAT 2: 710 Q50 V35
Re: If prices are reduced 25% and sales increase 20%, what is the net eff [#permalink]
1
Kudos
chandan1988
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.
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
chandan1988
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.