Shortcut Trick
If both the Cost Price and the Selling Price are multiplied by the same scaling factor, the Profit Percentage remains constant.
Decreasing both prices by 50 percent is equivalent to multiplying them by a factor of 0.5.
Since both are scaled equally, the ratio of Selling Price to Cost Price does not change.
∴ The correct answer is 40 percent.
Alternate Method
Given:
Initial Profit Percentage = 40 percent
Decrease in Cost Price (CP) = 50 percent
Decrease in Selling Price (SP) = 50 percent
Formula Used:
Profit = Selling Price (SP) − Cost Price (CP)
Profit Percentage = (Profit ÷ Cost Price) × 100
Calculations:
⇒ Let the initial Cost Price (CP) = 100 units
⇒ Since Profit is 40%, initial Selling Price (SP) = 100 + (40% of 100) = 140 units
⇒ New CP = 100 − (50% of 100) = 50 units
⇒ New SP = 140 − (50% of 140) = 70 units
⇒ New Profit = New SP − New CP = 70 − 50 = 20 units
⇒ New Profit Percentage = (New Profit ÷ New CP) × 100
⇒ New Profit Percentage = (20 ÷ 50) × 100 = 40 percent
∴ The correct answer is 40 percent.
Additional Information
Profit and Loss Ratios
The profit percentage depends entirely on the ratio of SP to CP. If SP/CP = k, then Profit % = (k − 1) × 100.
Successive Changes in CP and SP
If CP changes by x% and SP changes by y%, the new profit percentage will change unless x = y.
Marked Price Relationship
SP = MP × (1 − Discount/100). Profit is always calculated on the CP unless stated otherwise.