Profit and Loss – Effect on revenue when price and quantity change: The price of a toy increases by 20%, and because of this the quantity sold decreases by 15%. What is the net effect on total sales revenue of the shop?

Introduction / Context:This question tests combined percentage changes. Sales revenue equals price * quantity. When both change, multiply their individual factors.

Given Data / Assumptions:

• Price increases by 20% ⇒ factor 1.20
• Quantity decreases by 15% ⇒ factor 0.85

Concept / Approach:Net revenue factor = price factor * quantity factor. Convert percentage to multiplicative factors before multiplying.

Step-by-Step Solution:Net factor = 1.20 * 0.85 = 1.02Net change = (1.02 - 1.00) * 100% = 2% increase

Verification / Alternative check:Assume initial price = 100 and quantity = 100; initial revenue = 10000. New revenue = 120 * 85 = 10200, which is 2% higher.

Why Other Options Are Wrong:2% decrease and 4% decrease contradict the product 1.20 * 0.85. 4% increase overstates the effect. No change is false since 1.02 ≠ 1.00.

Common Pitfalls:Adding percentages (20% - 15% = 5%) instead of multiplying factors.

Final Answer:2% increase