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A company decreased the price

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A company decreased the price

by Vincen » Wed Oct 11, 2017 5:58 pm
A company decreased the price of its main product by 50%. Subsequently, the number of units sold increased such that the total revenue remained unchanged. What was the ratio of the percent increase in the units sold to the percent decrease of the original price for this product?

A. 0.5
B. 1.0
C. 1.5
D. 2.0
E. 4.0

The OA is D.

This questions with "ratio" are so hard to me. Experts, I need you give a clarification. Please.
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by [email protected] » Thu Oct 12, 2017 12:41 pm
Hi Vincen,

We're told that a company decreased the price of its main product by 50% and the number of units of that product sold increased such that the total revenue remained the SAME. We're asked for the ratio of the PERCENT INCREASE in the units sold to the PERCENT DECREASE of the original price for this product. This question can be solved by TESTing VALUES.

As an example, let's say that we have 10 units that sell for $10 each. (10)($10) = $100 of revenue.

IF we decrease the PRICE by 50%, then the new price is $5/unit. To end up with the SAME overall revenue....
(X units)($5) = $100
X = 20 units must be sold

Thus, when the PRICE decreases by 50%, to hit the same overall revenue, the number of units sold must INCREASE by 100% (as an aside, it's worth noting that when you DOUBLE a number, you are increasing it by 100%... NOT by 200%).

(percent increase in units sold)/(percent decrease in price per unit) = 100%/50% = 2

Final Answer: D

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by Matt@VeritasPrep » Thu Oct 12, 2017 8:50 pm
We could make it easy on ourselves by imagining what would have if we had one of these products.

Say I've got a $100 watch. The price drops by 50%, and now it's a $50 watch. But I sell enough of them to still have $100, so I must have sold two of them. Aha!

So selling TWICE as many at HALF the original cost nets me the original amount of money, since 2 * (0.5) = 1.
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Re: A company decreased the price

by Scott@TargetTestPrep » Thu Jan 23, 2020 9:20 am
Vincen wrote: ↑
Wed Oct 11, 2017 5:58 pm
 A company decreased the price of its main product by 50%. Subsequently, the number of units sold increased such that the total revenue remained unchanged. What was the ratio of the percent increase in the units sold to the percent decrease of the original price for this product?

A. 0.5
B. 1.0
C. 1.5
D. 2.0
E. 4.0

The OA is D.

This questions with "ratio" are so hard to me. Experts, I need you give a clarification. Please.
Since the company decreased the price of its product by 50% = 1/2, in order to keep the revenue the same, the number of units sold would need to be 2 times what was sold previously, or a 100% increase, which is 1.

Thus, the ratio of the percent increase in units sold to the percent decrease in price is:

(1)/(1/2) = 2

Answer: D

Scott Woodbury-Stewart
Founder and CEO
[email protected]

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