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2.2 - Important Terms

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Understanding Cost Price and Selling Price

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Teacher
Teacher

Today, we will start with the basic terms of commercial mathematics: Cost Price and Selling Price. Can anyone tell me what Cost Price is?

Student 1
Student 1

Isn't it the price you buy something for?

Teacher
Teacher

Exactly! Cost Price (C.P.) is the price at which an article is purchased. Now, can someone define Selling Price?

Student 2
Student 2

I think Selling Price is how much you sell it for.

Teacher
Teacher

That's right! The Selling Price (S.P.) is the price at which an article is sold. Now, why do you think it's important to know both of these prices?

Student 3
Student 3

So we can tell if we made a profit or loss?

Teacher
Teacher

Exactly! Knowing both helps us calculate profit and loss.

Teacher
Teacher

Let’s summarize: Cost Price is what you pay, and Selling Price is what you earn when you sell. Great job!

Profit and Loss

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Teacher
Teacher

Now that we understand C.P. and S.P., let’s talk about profit and loss. Who can tell me how we calculate profit?

Student 4
Student 4

Profit is Selling Price minus Cost Price!

Teacher
Teacher

Correct! Profit is calculated as S.P. − C.P. Now, what about loss? How do we determine that?

Student 1
Student 1

Loss would be Cost Price minus Selling Price.

Teacher
Teacher

Excellent! Loss equals C.P. − S.P. Remember, profit means we earn more than we spent, while loss means we spend more than we earn.

Student 3
Student 3

So if I buy a shirt for $20 and sell it for $25, I would have a profit of $5?

Teacher
Teacher

Exactly! And if you sold it for $15, what would that mean?

Student 2
Student 2

That would be a loss of $5!

Teacher
Teacher

Great job! Remember this formula to calculate your gains and losses.

Marked Price and Discount

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Teacher
Teacher

Next, let’s explore Marked Price and Discount. What do you think is the Marked Price?

Student 1
Student 1

Is it the price before anything is taken off?

Teacher
Teacher

Exactly! The Marked Price (M.P.) is the initial price before any discounts. Now, how does a discount work?

Student 3
Student 3

It's the amount reduced from the marked price.

Teacher
Teacher

Correct! The discount is the reduction applied, leading to the Selling Price. Can anyone give me an example of this in action?

Student 4
Student 4

If a bike has a marked price of $500 and there’s a discount of $50, then the Selling Price would be $450?

Teacher
Teacher

Absolutely right! Marked Price minus Discount gives you Selling Price. Remember this simple calculation.

Introduction & Overview

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Quick Overview

This section covers key financial terms necessary for understanding commercial mathematics, including cost price, selling price, profit, loss, and discount.

Standard

In this section, we delve into important commercial terms that empower students to understand fundamental financial calculations. Terms such as Cost Price (C.P.), Selling Price (S.P.), Profit, Loss, Marked Price (M.P.), and Discount are defined and explained.

Detailed

Important Terms in Commercial Mathematics

Understanding commercial mathematics is essential for practical application in financial transactions. This section introduces key terms:
- Cost Price (C.P.): The price at which an article is purchased, forming the basis for all profit-loss calculations.
- Selling Price (S.P.): The price at which the article is sold, critical for determining profit or loss.
- Profit (Gain): Calculated as the difference between Selling Price and Cost Price (S.P. − C.P.), indicating the financial gain from sales.
- Loss: The reverse scenario where Selling Price is less than Cost Price, calculated as C.P. − S.P., highlighting financial shortcomings.
- Marked Price (M.P.): The initial price marked on an article before any potential discounts are applied, serving as a reference point for pricing strategies.
- Discount: The reduction applied on the marked price, allowing customers to pay a lower price, which can impact profit margins.

These terms set the stage for more complex calculations and financial decision-making in later sections, emphasizing their significance in commercial contexts.

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Audio Book

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Cost Price (C.P.)

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● Cost Price (C.P.): The price at which an article is purchased.

Detailed Explanation

The Cost Price (C.P.) is the amount of money a buyer pays to purchase an item. It's essential for calculating profit or loss because you compare the selling price with the cost price to determine how well you've done in a transaction.

Examples & Analogies

Imagine you buy a new video game console for $300. In this case, the cost price of the console is $300. This amount is crucial because it sets the baseline for how much you can earn or lose when you sell it.

Selling Price (S.P.)

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● Selling Price (S.P.): The price at which the article is sold.

Detailed Explanation

The Selling Price (S.P.) is the amount at which an item is sold. When you sell an item, this is the price that the customer pays. You will compare this with the cost price to find out if you made a profit or suffered a loss.

Examples & Analogies

Continuing with the video game console example, if you sell that console for $400, the selling price is $400. This is what you earn after selling the item.

Profit (Gain)

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● Profit (Gain): S.P.−C.P.

Detailed Explanation

Profit is the financial gain that occurs when the selling price is greater than the cost price. It is calculated by subtracting the cost price from the selling price. If you make more money from selling an item than you spent to buy it, you have made a profit.

Examples & Analogies

Using the previous examples, you bought the console for $300 and sold it for $400. The profit is computed as $400 - $300 = $100. This means you made a gain of $100 from that transaction.

Loss

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● Loss: C.P.−S.P.

Detailed Explanation

Loss occurs when the selling price is less than the cost price. It is calculated by subtracting the selling price from the cost price. If you sell an item for less than what you bought it for, you incur a loss.

Examples & Analogies

If you had to sell the video game console for only $250 after purchasing it for $300, the loss would be $300 - $250 = $50. This scenario represents a financial setback of $50 on your investment.

Marked Price (M.P.)

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● Marked Price (M.P.): The price marked on the article before discount.

Detailed Explanation

The Marked Price (M.P.) is the price that is originally set or labeled on an item before any discounts are applied. It serves as the reference price from which discounts or promotions could be taken.

Examples & Analogies

Think of a price tag on a shirt in a store that says $50. That $50 is the marked price. If there's a sale and the store offers a discount, the marked price helps to determine how much the new selling price will be.

Discount

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● Discount: Reduction given on the marked price.

Detailed Explanation

A discount is a reduction from the marked price of an item, usually expressed as a percentage. This reduction makes the selling price lower, encouraging sales during promotions.

Examples & Analogies

If the shirt marked at $50 has a 20% discount, the calculation for the discount amount is $50 × 0.20 = $10. Therefore, the selling price after applying the discount will be $50 - $10 = $40.

Definitions & Key Concepts

Learn essential terms and foundational ideas that form the basis of the topic.

Key Concepts

  • Cost Price: The price for which an item is bought, essential for calculating profit and loss.

  • Selling Price: The price at which an item is sold, fundamental to understanding total earnings.

  • Profit: The financial gain achieved when Selling Price exceeds Cost Price.

  • Loss: The financial deficit experienced when Cost Price exceeds Selling Price.

  • Marked Price: The list price before discounts, serving as a reference for pricing.

  • Discount: The reduction on the marked price, influencing final Selling Price.

Examples & Real-Life Applications

See how the concepts apply in real-world scenarios to understand their practical implications.

Examples

  • A shirt is bought for $30 (C.P.) and sold for $50 (S.P.). The profit is $50 - $30 = $20.

  • A book is purchased for $25 (C.P.) and sold for $20 (S.P.). The loss is $25 - $20 = $5.

Memory Aids

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🎵 Rhymes Time

  • When you buy at a price, that's C.P., / Selling high brings you glee, / Profit's the difference, you’ll see!

📖 Fascinating Stories

  • Imagine you own a bakery. You buy flour for $2 (C.P.) and sell cakes for $3 (S.P.). Each cake you sell earns a profit of $1. If a customer asks for a discount, you know to reduce from the M.P.

🧠 Other Memory Gems

  • CP for Cost Price, SP for Selling Price, Profit from SP minus CP. Loss equals CP minus SP.

🎯 Super Acronyms

P.L.D. = Profit, Loss, Discount; remember these to understand transactions!

Flash Cards

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Glossary of Terms

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  • Term: Cost Price (C.P.)

    Definition:

    The price at which an article is purchased.

  • Term: Selling Price (S.P.)

    Definition:

    The price at which the article is sold.

  • Term: Profit

    Definition:

    The financial gain calculated as S.P. − C.P.

  • Term: Loss

    Definition:

    The financial loss calculated as C.P. − S.P.

  • Term: Marked Price (M.P.)

    Definition:

    The price marked on an article before any discount.

  • Term: Discount

    Definition:

    The reduction given on the marked price.