Discounts: Definition, Formula, Rate

Discount Definition

Discount is when the price of a product or service is reduced so that customers pay less than the original price. Shopkeepers give discounts to sell their products fast, attract more buyers, and keep their regular customers happy. Discounts can be shown as a fixed amount or a percentage of the original price.

As per the discount definition, it is the reduction in the marked price of an item. The marked price is the price written by the seller or manufacturer before any reduction. The selling price is the price you pay after the discount. A discount is always calculated on the marked price, not on the selling price. Keep reading to learn more about the types of discounts and examples.

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Discount Formula

The discount formula helps you find how much money you save on a product or service. When you know the list price and selling price, you can use this discount formula:

• Discount = List Price – Selling Price

You can also find the selling price if we know the discount, using the formula:

• Selling Price = List Price – Discount

The discount formula is also used to calculate the discount rate as a percentage. You can use this formula:

• Discount Rate (%) = (Discount ÷ List Price) × 100

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Discount Calculation

The discount calculation helps you calculate how much money is reduced from the original price and what the final selling price will be. When the discount percentage is given, you can follow these steps to find the answer:

• Step 1: Divide the discount percentage by 100 to change it into a decimal.

• Step 2: Multiply the list price by this decimal to get the discount amount.

• Step 3: Subtract the discount from the list price to find the selling price.

Read More: Difference Between Simple Interest and Compound Interest

Types of Discounts

Sellers or manufacturers offer different kinds of discounts whenever we purchase something. These discounts help increase sales and attract more customers. The main types of discounts are:

1. Trade Discount: This type of discount is given by the distributor to the retailer. Distributors sell goods in large quantities to shopkeepers at a lower price. This helps them sell products easily and in bulk.

2. Quantity Discount: When a customer buys many items together, they get a quantity discount. This discount motivates customers to purchase more items at once. For example, if you buy 10 notebooks, the shopkeeper may give you one extra or reduce the total price.

3. Promotional Discount: A promotional discount is given to promote new products or to clear old stock. It is generally shown in offers like “Buy 2 Get 1 Free” or “Flat 50% Off”. These types of discounts attract customers and increase sales.

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Discount Rate

When the price of an item is decreased, it means a discount is given. If this price reduction is shown as a percentage, it is called the discount rate or discount percentage. It helps you understand how much the percentage of the original price has decreased. The formula to calculate the discount rate is:

Discount Rate (%) = (List Price − Selling Price) ÷ List Price × 100

OR

Discount Rate (%) = (Discount ÷ List Price) × 100

In order to find the discount rate, it is important that you either know the discount amount or both the list price and selling price.

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Solved Examples of Discounts

Here are some solved examples of discounts to understand how to calculate the discount amount, discount rate, and list price in an easy way.

Example 1: The list price of a pencil box is INR 500, and the selling price is INR 400. Find the discount.

Solution:

List Price: INR 500
Selling Price: INR 400

Discount = List Price – Selling Price
= INR 500 – INR 400
= INR 100

Therefore, the discount is INR 100.

Example 2: A shirt is marked at INR 1,200 but is sold for INR 960. Find the discount rate.

Solution:

List Price: INR 1,200
Selling Price: INR 960

Discount = INR 1,200 – INR 960 = INR 240

Discount Rate = (Discount ÷ List Price) × 100
= (240 ÷ 1200) × 100
= 0.2 × 100
= 20%

Hence, the discount rate is 20%.

Example 3: A mobile phone is sold for INR 13,500 after a discount of INR 1,500. Find its list price.

Solution:

Selling Price: INR 13,500
Discount: INR 1,500

List Price = Selling Price + Discount
= INR 13,500 + INR 1,500
= INR 15,000

Hence, the list price of the mobile phone is INR 15,000.

Example 4: The marked price of a watch is INR 3,000. During a sale, it is offered at a 25% discount. Find the selling price.

Solution:

List Price: INR 3,000
Discount Rate = 25%

Discount = (Discount Rate × List Price) ÷ 100
= (25 × 3000) ÷ 100
= 75,000 ÷ 100
= INR 750

Selling Price = List Price – Discount
= INR 3,000 – INR 750
= INR 2,250

Therefore, the selling price of the watch is INR 2,250.

Also read: Quick Calculation Techniques for School Students

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