A foreign country reduces its import duty on an Indian exporter's product from 30% to 10%. The exporter estimates that the reduction in import duties - which he will pass on fully by reducing prices -- will increase the volume of sales by 50%. The revenue obtained in that market turned out to be Rs 165Cr. What would the revenue have been if the exporter continued selling at the old price?
A foreign country reduces its import duty on an Indian exporter's product from 30% to 10%. The exporter estimates that the reduction in import duties - which he will pass on fully by reducing prices -- will increase the volume of sales by 50%. The revenue obtained in that market turned out to be Rs 165Cr. What would the revenue have been if the exporter continued selling at the old price?
Solution
Let the base price of the product (before any duty) be and the original volume of sales be units.
Old selling price of
New selling price of
Since the price dropped, sales volume increased by :
New Volume
New Revenue Cr
If the exporter had continued selling at the old price, there would be no price drop and hence no increase in volume. Volume stays at .
Old Revenue
Cr
The revenue would have been Rs Cr.
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BMSAT Kozhikode 2025
BMSAT Kozhikode 2025