Examples
For example, when you go to the car dealer, the new cars will have big stickers on the windows showing you the features of the car, the gas mileage, and the MSRP. This is the list price you are expected to pay before any discounts are applied.
When you go shopping at a department store, you'll find the list price shown on the price tags attached to various items. With these items, you may not always see the MSRP letters, but you will see a price written or printed on the product packaging or a sticker placed on the product.
A price sticker on a product
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Discounted List Price
This doesn't mean that this is the price you will always pay. Many times, you'll pay less than the list price. This is because many stores have various customer promotions going on at any given time. Stores often give out discounts and/or coupons. When your favorite store does have a promotion, you can use the list price to help you find the price that you'll actually end up paying.
Imagine you are eyeing a pair of sleek, comfortable sneakers. The list price for these shoes is $80. You've been wanting these shoes for a while now. And today might be the day you get them because they are now on sale. The discount today happens to be 20 percent!
When it comes to finding the final cost after a discount, you'll be using this formula:
- price you pay = list price * ( 1 - discount )
This formula tells you that you need to turn your discount into a decimal. Remember you do this by dividing your percentage by 100. So 20 percent becomes 20 percent / 100 = 0.2. You then subtract that converted percentage from 1. Then you multiply your result with your list price to find the price you end up paying.
So, for your dream pair of shoes, this is your calculation:
- price you pay = $80 * ( 1 - 0.2 )
- price you pay = $80 * ( 0.8 )
- price you pay = $64
So, with a discount of 20 percent, you'll end up paying $64.
Lesson Summary
Let's review.
The list price is the manufacturer's suggested retail price (MSRP) based on the supply and demand of their items.
This list price is not always the price you end up paying. Many times stores will have promotions or discounts that apply so you end up paying less than the list price.
To help you calculate the final cost of a product on discount, you'll use this formula.
- price you pay = list price * ( 1 - discount )
You'll need to convert your discount percentage into a decimal by dividing it by 100 before using it in the formula.
Happy shopping!
