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This is not a statistical question, rather it is economical: Management is considering giving a discount...

This is not a statistical question, rather it is economical: Management is considering giving a discount of 5% on the selling prices of all the 'Category' items. It is assumed unit sales of all the category items will then increase by 15%. Show that revenue will increase if the discount is applied..

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Answer #1

Let us assume that the selling price before discount is $ 5 and the unit sales at this price is 100 units.

Revenue = Price unit sales

Revenue = $ 5 100 units = $ 500

Selling price after discount = $ 5 - 0.05 $ 5

Selling price after discount = $ 4.75

Unit sales = 100 + 0.15 100

Unit sales = 115

Revenue = $ 4.75 115 units = $ 546.25

Thus from the above calculations, we can conclude that revenue will increase when the discount is applied. We notice that the revenue has increased by $ 46.25 after giving a discount of 5% on the selling prices of all the 'Category' items.

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