ECONOMICS
INCENTIVES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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65% off a $25.00 jacket
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$17.00 off a $25.00 jacket
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Either A or B
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None of the above
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Detailed explanation-1: -To calculate 25% discount of a price, we multiply the percentage discount by the original price (to get the discount amount) and then subtract the discount amount from the original price. Suppose the original price is $40 . To take a 25% discount from the original price, we have: $40−0.25($40)=$30.
Detailed explanation-2: -If a price is higher than $100 (the equivalent amount would be more than $10 off), we perceive it as a smaller discount than what it actually is. When we see $20 off instead of $10 off for a $200 item, we think of the number 20, which is higher, so better.
Detailed explanation-3: -Convert 25% to a decimal by dividing by 100: 25/100 = 0.25. Multiply list price by decimal percent: 130*0.25 = 32.50. Subtract discount amount from list price: 130-32.50 = 97.50. With the formula: 130-(130*(25/100)) = 130-(130*0.25) = 130-32.50 = 97.50. 25% off $130 is $97.50.