Question
Download Solution PDFWhen the price of a portable hard disk is reduced by 24%, its sale increases by 35%. What is the net percentage change in the total revenue?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFGiven:
Price of portable hard disk is reduced by 24%, and the sale increases by 35%. We need to find the net percentage change in total revenue.
Formula used:
Net percentage change in revenue = (Percentage change in price) + (Percentage change in quantity) + (Percentage change due to both)
Calculations:
Let the original price of the hard disk be P and the original quantity sold be Q.
New price = P × (1 - 24/100) = 0.76P.
New quantity sold = Q × (1 + 35/100) = 1.35Q.
The new revenue is:
New Revenue = New price × New quantity = 0.76P × 1.35Q = 1.026PQ.
The original revenue was: Original Revenue = P × Q = PQ.
The net percentage change in revenue is:
Net percentage change in revenue = [(New Revenue - Original Revenue) / Original Revenue] × 100
→ Net percentage change in revenue = [(1.026PQ - PQ) / PQ] × 100
→ Net percentage change in revenue = (0.026PQ / PQ) × 100
→ Net percentage change in revenue = 2.6%.
∴ The net percentage change in the total revenue is an increase of 2.6%.
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