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Discounts never fail to grab our attention. But how do businesses make money by selling products at a lower price? Learn the concept behind discount and markup to understand how businesses use discounts to attract more customers....Read MoreRead Less

The term “discount” refers to a reduction in the listed or marked price in order to sell a product for a lower price. A discount can be expressed as an amount or as a percent. The difference between the listed price or marked price and the selling price is the discount. Let’s look at what the discount formula is and how it works with examples.

The term “discount” refers to reduced prices for an item being sold for a lower price than it normally would. For example, a dress being sold at 20% of its normal price.

Stores buy products in bulk at wholesale prices. They then raise product prices before selling them in order to recoup their costs and make a profit. This is called marking up.

The discount and markup can be calculated using the following formula:

- Discount = Original price – Sale price
- Discount = Discount % \(\times\) original price
- Markup = Selling price – Cost to store
- Markup = Markup % \(\times\) Cost to store

The reduction in the price of goods or services offered by shopkeepers from the marked or listed price is referred to as a discount.

The discount refers to the difference between the original price and the sale price.

Discount = Original price – Sale price

Discount = Discount % \(\times\) original price

The prices at which stores sell their goods are referred to as selling prices. The difference between the wholesale and selling prices is known as the markup. The price paid by the store to acquire that product, is the cost to the store. The formula for this is as follows:

Markup = Selling price – Cost to store

Markup = Markup % \(\times\) Cost to store

**Example 1: **

Determine the discount Bob received on a chair if the selling price is $6 and the list price is $10.

**Solution:**It is given that, original price = $10 and sale price = $6.

Discount = Original price – Sale price.

Discount = $10 – $6

= $4.

As a result, Bob got a $4 discount.

**Example 2: **

The price tag on a T-shirt said $30 but Daniel only paid $20 because there was a discount. Calculate the discount.

**Solution:**

It is given that, original price = $30 and sale price = $20.

Therefore, discount = original price – sale price

= $30 – $20

= $10

As a result, Daniel received a $10 discount.

**Example 3:**

A store pays $65 for a belt. Further, a 35% markup is applied on it. How much does John pay for the belt?

**Solution:**

Mark up = 35% × 65

= 0.35 × 65

= 22.75

Selling price = Cost to store + Markup

= 65 + 22.75

= 87.75

As a result, John purchases the belt for $87.75.

**Example 4:**

You go shopping for your mother and spend $120 on a pair of earrings. You find out later that the price had been increased by 20 %. What was the price of the earrings purchased by the store?

**Solution:**

Let the cost to store be C.

Markup = Markup% × Cost to store

= 20% × C

= 0.20 C

Cost to store = Selling price – Markup

C = 120 – 0.20C

C + 0.20C = 120

1.20C = 120

C = \(\frac{120}{1.20}\) = $100

As a result, the cost to store is $100.

**Example 5:**

If a software costs $2000, a shopkeeper applies a 40% discount on the software for computers on account of Black Friday. Calculate the sale price of the software.

**Solution:**Discount = Discount % \(\times\) original price

Discount = 40 % × 2000

= \(\frac{40}{100}\) × 2000

= 800

Discount = Original price – Sale price

800 = 2000 – Sale price

Sale price = 2000 – 800

Sale price = 1200

As a result, the sale price of the game is $1200.

Frequently Asked Questions

When the price of a commodity is reduced, the discount is the amount of money saved. To put it another way, a discount is a rebate or a reduction in the price of an object.

The difference between the original price and the sale price is referred to as the discount.

Discount = Original price – Sale price

A markup is a value added to the cost price of goods to cover operating costs and to add profit, whereas a discount is a reduction in the catalog price (or list price).

To calculate the discount, multiply the discount percent by the original price.

Discount = Discount % \(\times\) original price

To get the sale price, subtract the discount from the original price.

Selling price = original price – discount

The price of your product is determined by the markup. The profit margin indicates how much money your company makes after expenses are deducted.