Answer:
the correct answer is 10% increase
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1Total sale = Price of 1 unit*Number of units sold.
GivenThe price of a cycle decreases by 20% and its demand is increased by 20%.
FindWe are asked to find the effect on the sale of the shop.
SolutionLet the initial price be P and the initial number of cycles sold be Q.
∴ Initial sale = P*Q = PQ
In the given case, the Price is decreased by 20% and the quantity is increased by 20%.
∴ New price = P - 20% of P = P - 0.2P = 0.8P
∴ New quantity = Q + 20% of Q = Q + 0.2Q = 0.8Q
∴ New sales = 0.8P*1.2Q = 0.96PQ
∴ Change in sales = New Sales - Initial Sales = 0.96PQ - PQ = -0.04PQ
∴ Effect in sales = Change in sales/Initial sales *100%
= (-0.04PQ/PQ)*100% = -0.04*100% = -4%.
The negative sign depicts that the sales have decreased.
∴ Hence, the sales of the shop are decreased by 4%.
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troublenkzz
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