Discount
Discounts are everywhere in your life. From shopping malls and e-commerce websites to financial transactions and tax calculations, you will need the concept of discount. Understanding the math behind discounts is important, whether you are a student or someone trying to purchase something.
1.0What is a Discount?
Discounts are a deduction from the price of a service or a commodity. It is usually used to drive sales. For instance, if a shirt marked at INR 100 is available at a 20% discount, the buyer will pay only INR 80.
2.0Discount Formula
The basic discount formula is:
Discount=Marked Price×100Discount Rate
Selling Price=Marked Price−Discount
Where:
- Marked Price (MP): The original listed price.
- Discount Rate: Percentage reduction offered.
- Selling Price (SP): Final price after discount.
3.0Types of Discount
Discounts come in various forms, each serving different business and customer needs. Understanding the types of discounts can help you identify the best deals and make the most savings.
Offered by wholesalers to retailers, a trade discount is a reduction on the list price of products sold in bulk. It is not recorded in the books of accounts.
This is a reduction offered to encourage early payment. For instance, "2/10, net 30" means a 2% discount if the bill is paid within 10 days.
Seasonal discounts are offered during specific times of the year to attract customers.
A quantity discount is given when goods are purchased in large volumes. It benefits both sellers (who reduce inventory) and buyers (who get more for less).
Given during product launches or special events to drive demand and brand visibility.
4.0Calculating Discount Price
Now that we understand the types, let’s see how to apply the discount formula for calculating discount price.
- Example 1: Single Discount
Question: A jacket is marked at INR 200 and is available at a 15% discount. What is the selling price?
Discount=200×10015=30
Selling Price=200−30=INR 170
- Example 2: Successive Discounts
Question: A phone originally priced at INR 1000 is given a 10% discount, followed by an additional 5%. Find the final price.
First Discount=1000×10010=INR 100
New price=INR 1000−INR 100=INR 900
Second discount=900×1005=INR 45
Final price=INR 900−INR 45=INR 855
5.0Examples of Discount Problems
Let's explore some real-world examples of discount problems that are frequently asked in exams and interviews.
- Problem 1: Finding Discount Rate
Question: The marked price of a bag is INR 600, and it is sold for INR 540. What is the discount rate?
Discount=600−540=60
Discount Rate=60060×100=10%
- Problem 2: Marked Price from Selling Price
Question: A pair of shoes was sold for INR 720 after a 20% discount. What was the marked price?
Let the marked price be x.
We have,
x−(10020×x)=720
x(1−10020)=720
x×0.8=720
x=900
6.0Discount vs Rebate: What’s the Difference?
Although the terms discount and rebate are often used interchangeably, there is a great difference between discount and rebate.
A discount is a proactive price reduction, while a rebate is reactive and often requires additional steps.
7.0Real-Life Applications of Discount
Understanding discounts is important not just for exams but also for real-world decisions.
- Shopping: Calculating the best deals during sales.
- Banking: Understanding interest and loan repayment schedules.
- Business: Offering trade or quantity discounts.
- Finance: Bond pricing and net present value involve discounts.
- Marketing: Designing promotional offers.