2 Answers | Add Yours
Imagine a situation a shopkeeper buys 100 items each cost $10. Then he marks the selling price of the item as $15. Let us say no one buys. Then he lower the price from $15 to $12 and boast he has given a 20% discount.
Now the people come and buy the item. Shopkeeper sells all of them to the buyers. Although he has given a discount he has a profit. Only loss is the profit margin.
If for $12 people don't buy the item the shopkeeper will give more discount. Even if people don't buy it he will realize that no point of having profit from the item. He has to cover at least full or part of the amount he paid for buying those items. So he will sell the item $10 or less by giving more and more discounts.. Here he will have a loss.
It usually depends on whether the value of the product has gone down from the marked price already. Then when the value of the product has gone down so does the demand for the product sometimes, so the shopkeeper will try and lower the price to get as much money back as possible from the product even though they have suffered a lost. However the shop keeper who discounts a product still does so to the point where they make most of their profit from selling that product in large quantities.
We’ve answered 320,022 questions. We can answer yours, too.Ask a question