Discussion
A trader marked the price of his commodity so as to include a profit of 25%. He allowed discount of 16% on the marked price. His actual profit was:
Answer: A
The actual profit was 5%.
Take the cost price as 100. The marked price includes 25% profit, and the discount is taken on the marked price.
\[ \begin{aligned} \text{MP} &= 100 \times 1.25 = 125 \\ \text{SP} &= 125 \times 0.84 = 105 \\ \text{profit} &= 105 - 100 = 5\% \end{aligned} \]
9% is the common mistake of subtracting the percentages (25 − 16), which ignores that the 16% is taken on 125, not on 100. 25% is the intended margin before any discount, and 16% is the discount itself.
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