Multiple choice

A company increased the price of a product by 20 percent. After the price increase, the sales volume dropped to three-fourths of its original value. What was the percentage change in the company's total revenue?

  1. -10%

  2. -5%

  3. 0%

  4. 5%

  5. 10%
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A Correct answer
Explanation

Revenue = Price * Quantity. Let initial price be P and quantity be Q. New price is 1.2P and new quantity is 0.75Q. New revenue = 1.2P * 0.75Q = 0.9PQ. This is a 10% decrease from the original revenue.

AI explanation

Revenue is calculated as price multiplied by sales volume. The new revenue is 1.20 times the old price multiplied by 0.75 times the old volume, yielding 0.90 of the original revenue. This represents a 10% decrease from the original revenue. The percentage change in the company's total revenue is -10%.

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