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Discount, Tax, and Tip Word Problems

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Discount is the reduction in usual price of an article. The shopkeepers try to lure as many customers as possible for which they sometimes offer a certain amount of rebate or discount to the customers. When discount is offered on an article, a certain price is attached to the article, which is the marked price of the article. When the shopkeeper offers discount on this marked price, customer pays the difference between the marked price and the discount.

So, the customer pays marked price – discount.

Example: If a store offers 20% discount on a female trouser costing $40, then what would be the new cost of trouser?

Discount on trouser = 20% of $40 = \frac{20}{100} × $40 = $8

So, new cost of trouser = $40 – $8 = $32

Tax is a certain percentage which is added to the customer’s cost price. It may be in the form of sales tax, service tax, entertainment tax etc.

Example: If the original cost of an MP3 player is $104 and there is 4% tax on it, then what would be the total amount Richards will have to pay to the shopkeeper?

Tax on the MP3 player = 4% of $104 =\frac{4}{100}  × $104 = $4.16

Total amount Richards would pay = $104 + $4.16 = $108.16

Tip is a small amount of money given to someone who provided service to us, like a server or waiter in a restaurant.

Example: Stance went to a restaurant for lunch. Her bill amount was $30 and she gave 10% tip to the server. How much amount did she pay in all?

Tip given to the server = 10% of $30 =\frac{10}{100}  × $30 = $3

Total amount Stance paid = $30 + $3 = $33


Check Point

  1. The original price of a motorcycle player is $11,300. If there is 40% discount on the motorcycle, then what is its selling price after discount?
  2. The original price of a purse is $50. If the store offers 50% discount and levies 4% tax on it, then what is the selling price of the purse?
  3. Daniel went for a dinner to a restaurant with his friends. The bill for dinner was $75.00 and they left 20% tip for the waiter. What was total amount they paid for the dinner, including the tip?
  4. If the original price of a jacket is $350 and the shopkeeper offers 10% discount with 6% sales tax on it, then what is the selling price of the jacket?
  5. If the sales tax for a state is 9%, then how much tax would Stacy pay for an item that costs $475?
Answer key
  1. $6,780
  2. $26
  3. $90
  4. $333.90
  5. $42.75

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