Lesson 2

Lesson Topic: Sale prices and discounts. This is a big topic which can be taught in conjunction with other lessons around decimals and percentages or it can be broken into multiple lessons.

Goal: For students to understand the different types of sales and price discounts they might see and be able to calculate how these sales will affect the price they pay.

Lesson Overview:

1. Class discussion – What do they know about how sale prices and discounts work?

2. Common sale types – lecture, class share

3. Math lesson, How to calculate discounts

4. Video – Calculating discounts

5. Classwork – Calculating discounts worksheet – do and review.

6. Wrap-up or Extension activity

Class discussion – Start a class discussion by asking the following questions: What are sales? How do sale prices and discounts work? Why do stores and companies offer discounts/sales. What is the difference between percentage discounts vs. dollar amount discounts. If a sale offers buy one get one free or buy one get one 50% off what does that mean? What is the actual discount. What is the difference of applying a discount before or after tax is applied. Especially for a high price item such as furniture or a vehicle.

Background information: As long as people have been selling things, merchants have offered sales or discounts. Often discounts on merchandise were and still are offered based on volume, meaning if you buy several of a certain item in one transaction, the merchant may offer a discount. But for this lesson, we are going to focus on the types of sales we commonly see in BC: Weekly sales where stores such as grocery stores or department stores offer certain items for less than they are usually priced and also specific time of year sales such as the infamous ‘Black Friday’ sales.

Generally stores offer sales for one of two reasons – to entice people into their store in the hope that they will buy other items as well (or become new regular customers if they are not already) and secondly sale prices are used to move merchandise quickly (you might recognize this as the ‘end of season’ sale). In most cases, stores are still making money on the items they sell on sale, but the margins are lower. The hope is that having a few items on sale will have buyers feel better about paying full price when buying other items while they are at the store. In some cases, a store may offer something called a ‘Loss Leader’ where they are actually selling an item at or below cost in order to entice people into their business. The idea of a loss leader rides on the edge of being legal. Having a loss leader by itself is not necessarily illegal, but if a company is purposefully pricing things below cost for an extended period of time with the intention that this will drive their competition out of business, that type of behavior contravenes the Canadian Competition Act, so companies generally offer ‘Loss Leaders’ as a limited time or limited amount sale meaning they often also have a limit attached to them, you are only allowed to buy one or two of an item otherwise someone could potentially buy out an entire stock and then resell the items.

Let’s take a look at some of the most common sale types:

*This can either be read out by the teacher or students as a handout, or perhaps photocopied and cut up and given to small groups to read, discuss and then share out with the class.

4) Percentage discounts – these types of sales are very common, they simply read something like ‘20% off purchase price, or whatever percentage they are going with. So if an item costs $100, we subtract 20% ($20) so now our purchase price is $80. One issue with these types of sales is often people only have a vague idea about what the total cost of a group of items will be because they have a hard time doing the math in their head or even with a calculator, they just know it will be cheaper, and the bigger the percentage discount, the cheaper it will be. Most people know that if an item is listed at 50% off, that it will be half price. This method is very common in clothing and department stores.

5) Price changes – These discounts are similar and may ultimately be based on percentages but they instead list the sale price specifically, usually in conjunction with the regular price so the customer can see the discount. For example an item might regularly be $9.99 and then there will be a sale tag that reprices the item at $7.99 so the customer can see it is $2 cheaper than usual (still around 20%, but much more overt and visual). This sale method is very common in grocery stores. This is also the type of discount you usually see with volume buying, so a grocery store may list an item at $4.99 but then say $4.49 each if you buy 5. The average person has a hard time figuring out what this means in terms of a total percentage discount, but all they know is it’s cheaper, and if it’s on an item that they usually buy a lot of like say juice boxes then it might make sense to them to stock up an ultimately save money.

6) ‘Buy one, Get one’ sales. Now these types of sale prices are a bit more complex. The customer still knows they are paying less than full price, but figuring out the true cost is a little more difficult. The first type of BOGO sale is Buy one, Get One Free. So if you have an item that is $100, you buy one and get a second of the same item free so you have two items and you still only paid $100, this is essentially the same as getting the items at 50% off (half price) but it forces you to buy two items instead of one. Often you will see something like buy one get the second at 50% off. Which makes you feel like you are paying half price when actually you are paying three quarter price. If the two items are $100 each the total is $100 for the first and $50 for the second ($100 at 50% off) for a total of $150 for both items or $75 each which is really only a savings of 25% on each item. This type of sale only works on items that are generally bought in multiples like clothing, you would likely never see a sale like this applied to something like a fridge because very few people would buy two fridges at the same time. What also often comes into play when this type of sale is offered on something like clothing (where you often see it) is that the sale will say something like – “Get a second item of equal or lesser value at half price” . Then it becomes a game for the consumer to find a second item as close to the price of the first item as possible in order to extract the maximum discount – stores count on this little piece of consumer psychology, let’s look at an example: In a buy one get one 50% off sale, let’s say your first item is $100. If your second item is also $100 then you have extracted the maximum 25% discount out of the sale, however if your second item is only $40 (which you get at 50% off so you pay $20) now your total is $120 on items that would have only cost $140 at full price, now your discount is only around 15%.

Math work: How to calculate discounts

Percentage Discounts: This is the simplest calculation to make especially if you have percentages that are multiples of ten like 10%, 20%, 30%...

If you have an item that is $80 at 30% off, to calculate the discount you simply lay it out as follows:

30% x 80 (cancel out the zeros and just multiply the two digits in the ten places 3 x 8 = 24) so $24 is 30% of 80. Subtract $24 from the $80 regular price and the price you will pay is: 80 – 24 = $66. Now if you have a calculator, you can do it in reverse by simply multiplying $80 by 0.7 . The point 7 comes from 100% is equal to 1.0 minus that 30% 0.3 equals 0.7 We will do some examples as a class, but the real usefulness of this comes when you can either do the math or at least estimate it in your head, then you can use it when you are out without even thinking. So the idea is to practice enough so that you have a general idea of how percentage discounts affect the purchase price. For example if you know that $100 at 25% off is $75, then it becomes easy to scale that up to $200 at 25% off is $150, which then also means that if you have $145 at 25% off you know it is roughly half way between $100 and $200 and those discounted prices are $75 and $150 respectively to $145 at 25% off must be just under halfway between those two so you can estimate it at $110, then with a calculator you can work it out 145 x .75 = $108.75

Example:

Something is $500 regular price, on a 20% off sale

• $500 – 20% = 500 – (0.2 x 500) = 500 – (100) = $400 (then you still have to add taxes back)

• So a real example with 12% sales tax added back would give a final price of $448.

*Do a few more easy made up examples for the class so they can see the process.

In-class work: Calculating Sale Prices worksheet is included, have students work on the ‘Calculating Sale Prices’ Worksheet that is provided in the book and go over the answers when finished.

In-class/Extension activity (or homework assignment)

· Find some flyers and check out the sale prices, then look online and see if you can find these same items for the same price or cheaper elsewhere. Is it really a sale price?

· Have a class discussion around where the students most commonly see sales. Do they feel that the psychology of a sale price might actually make them buy something that they likely would not ordinarily buy? Have they experienced this?