Discount

Definition

A discount is a reduction in the original price of a good or service, typically offered by sellers to attract customers or promote sales. It represents a monetary amount or percentage that is subtracted from the regular or list price.

5 Must Know Facts For Your Next Test

1. Discounts can be applied to both retail and wholesale prices, helping to attract customers and increase sales.
2. The amount of the discount is often determined by factors such as the type of product, market conditions, and the seller's profit margins.
3. Discounts can be offered in various forms, including percentage-based discounts, fixed-amount discounts, or a combination of both.
4. Retailers may use discounts strategically to clear out excess inventory, introduce new products, or match competitors' prices.
5. Customers can take advantage of discounts to save money and get better value for their purchases.

Review Questions

• How can a discount be used to solve general applications of percent?
  • In the context of general applications of percent, a discount can be used to calculate the reduced price of an item after a certain percentage is subtracted from the original price. For example, if an item has a regular price of $100 and a 20% discount is applied, the new price would be $80 (100% - 20% = 80%). This type of percent-based discount calculation is a common application of understanding percent and can be used to solve a variety of real-world problems involving sales, promotions, and consumer purchases.
• Explain how discounts are used in sales tax, commission, and other money applications.
  • Discounts play a significant role in solving sales tax, commission, and other money applications. When calculating the total cost of an item, the discount must be applied first before adding sales tax. This ensures that the tax is only charged on the discounted price, not the original price. Similarly, in commission-based sales, the discount may affect the commission earned by the salesperson, as their commission is typically calculated as a percentage of the final sale price after the discount has been applied. Discounts can also be used in various other money applications, such as calculating the net pay after deductions or determining the final cost of a bundle of products with different discounts.
• Analyze how the concept of discount can be used to solve more complex money applications.
  • The concept of discount can be extended to solve more complex money applications, such as compound interest calculations or present value determinations. In the context of compound interest, a discount rate can be used to calculate the present value of a future cash flow, allowing for the time value of money to be taken into account. Similarly, in personal finance applications, the concept of a discount can be applied to evaluate the true cost of a loan or investment, considering factors like interest rates, fees, and potential future earnings or expenses. By understanding the role of discounts in these more advanced money applications, students can develop a deeper appreciation for the practical implications of this key financial concept.

Related terms

Percent Discount: A discount expressed as a percentage of the original price, indicating how much the price has been reduced.

Markdown: A reduction in the selling price of merchandise, often used to clear out inventory or make room for new products.

Coupon: A voucher that entitles the holder to a discount on a particular product or service.