Question : When the price of cloth was reduced by 25%, the quantity of cloth sold increased by 20%. What was the effect on the gross receipt of the shop?
Option 1: 5% increase
Option 2: 5% decrease
Option 3: 10% increase
Option 4: 10% decrease
Correct Answer: 10% decrease
Solution :
The effect on the gross receipt of the shop can be calculated using the concept of successive percentage change.
Net percentage change = ($a + b + \frac{ab}{100}$)%
In this case, $a$ is –25% (since the price is reduced) and $b$ is 20%.
=$ -25 + 20 + (\frac{-25 \times 20}{100}) = -5 - 5 = -10\%$
Hence, the correct answer is a 10% decrease.
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