Let’s assume the merchant intends to buy and sell 1 meter (100 cm) of cloth.
### When buying:
- The merchant uses a 120 cm faulty scale instead of 100 cm.
- So, when he buys 1 meter of cloth, he actually gets \( \frac{120}{100} \times 100 = 120 \) cm of cloth.
- Therefore, for every 1 meter he buys, he gets 1.2 meters of cloth.
### When selling:
- The merchant uses an 80 cm faulty scale instead of 100 cm.
- So, when he sells 1 meter of cloth, he actually gives only \( \frac{80}{100} \times 100 = 80 \) cm of cloth.
- Therefore, for every 1 meter he sells, he actually gives 0.8 meters of cloth.
### Profit without discount:
- The merchant buys 1.2 meters of cloth and sells only 0.8 meters as 1 meter.
- The effective amount of cloth sold for 1 meter is \( \frac{1.2}{0.8} = 1.5 \).
- Therefore, his profit is \( 1.5 - 1 = 0.5 \) or 50%.
### Considering the discount:
- After offering a 20% discount, the merchant sells the cloth at 80% of the price.
- So, the selling price becomes 80% of the marked price, which reduces his profit.
### Adjusted profit with the discount:
- The profit with the discount is \( 1.5 \times 0.8 = 1.2 \).
- Therefore, his profit is \( 1.2 - 1 = 0.2 \) or 20%.
Thus, the merchant’s overall profit is **20%**.