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Question:A store owner increases the price of an item from $40 to $50. The increase in price is what percentage...

GMAT Problem-Solving and Data Analysis : (PS_DA) Questions

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Problem-Solving and Data Analysis
Percentages
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Question:

A store owner increases the price of an item from \(\$40\) to \(\$50\). The increase in price is what percentage of the original price?

Answer Choices:

  1. \(12.5\%\)
  2. \(20\%\)
  3. \(25\%\)
  4. \(80\%\)
A
\(12.5\%\)
B
\(20\%\)
C
\(25\%\)
D
\(80\%\)
Solution

1. TRANSLATE the problem information

  • Given information:
    • Original price: \(\$40\)
    • New price: \(\$50\)
  • What we need to find: The increase as a percentage of the original price

2. INFER what calculation is needed first

  • We need the actual dollar amount of the increase
  • Price increase = New price - Original price = \(\$50 - \$40 = \$10\)

3. TRANSLATE the key phrase into math

  • "What percentage of the original price" means:
    • The increase (\(\$10\)) is the "part"
    • The original price (\(\$40\)) is the "whole"
  • This gives us the setup: \(\frac{\mathrm{Increase}}{\mathrm{Original\ Price}} \times 100\%\)

4. SIMPLIFY the calculation

  • Substitute values: \(\frac{\$10}{\$40} \times 100\%\)
  • Simplify the fraction: \(\frac{\$10}{\$40} = \frac{1}{4}\)
  • Convert to percentage: \(\frac{1}{4} \times 100\% = 25\%\)

Answer: (C) 25%




Why Students Usually Falter on This Problem

Most Common Error Path:

Weak INFER skill: Students misinterpret "percentage of the original price" and use the new price (\(\$50\)) as the denominator instead of the original price (\(\$40\)).

Their calculation becomes: \(\frac{\$10}{\$50} \times 100\% = 20\%\)

This leads them to select Choice (B) (20%)

Second Most Common Error:

Poor TRANSLATE reasoning: Students calculate the new price as a percentage of the original price instead of just the increase.

They compute: \(\frac{\$50}{\$40} \times 100\% = 125\%\), then get confused about what this means in the context of the answer choices. This leads to confusion and guessing.

The Bottom Line:

The critical insight is recognizing that "percentage of the original price" specifically refers to using the original price as the base (denominator) for the percentage calculation, not the new price.

Answer Choices Explained
A
\(12.5\%\)
B
\(20\%\)
C
\(25\%\)
D
\(80\%\)
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