Discount Rate is not Markup Rate. Why?

1.

2. What is the markup rate from RM3 to RM6?

I have asked these questions to my close friends and the majority of them reply 50% for both questions. Some even said 150%. So, what is the correct answer? To answer that, let’s look at the formula:

**Discount/Markup** **Rate = ((New Price – Old Price) / Old Price) * 100%**

**Question 1:**

**Discount** **Rate = ((RM3 – RM6) / RM6) * 100% = -50%**

Instead of saying -50%, we usually say “Discount” 50%.

**Question 2:**

**Markup** **Rate = ((RM6 – RM3) / RM3) * 100% = 100%**

The markup rate or price increased by 100%

Noticed the discount and markup rate are different even though the new and old price are fixed at RM3 and RM6. Moreover, the markup rate is higher than the discount rate. Below is a simple table on the corresponding markup rate based on the discount rate.

Discount Rate | Markup Rate |

-10% | 11% |

-15% | 18% |

-20% | 25% |

-25% | 33% |

-30% | 43% |

-35% | 54% |

-40% | 67% |

-45% | 82% |

-50% | 100% |

This explains why people love to shop during a discount period. Say an item is being sold at 50% below its original price. If you were to buy it during the discount period, you get to save 50%. If you missed and buy the same item after the discount period, technically you are paying extra 100% compared to the discount price.

The usual misconception is discount and markup rates are the same. As shown above, they are not. This understanding is crucial when it comes to investing which will be covered in my next post.

A part-time Malaysian blogger writing his thoughts online. Interest in both personal finance and economics, mainly the behavior aspect of them. I consider myself Poyo since I do not have any significant credentials in both fields, so readers beware. Thanks for reading.