Discount Calculator
Calculate final price with discount and tax.
Quick discounts:
How discounts and psychological pricing work
Discounts are a pricing strategy used in both physical and e-commerce retail. Several types exist: simple discount (a direct percentage), compound discount (two or more discounts applied successively), volume discount, and early payment discount. It is a common mistake to add compound discount percentages: a 20% + 20% does not equal 40%, but 36% total discount, because the second discount is applied to the already reduced price.
Pricing psychology plays an important role in how we perceive discounts. Prices ending in 9 or 99 (like $49.99 instead of $50.00) create the perception of a lower price. Tax is calculated on the discounted price, not the original price.
Frequently asked questions
What is a compound discount?
A compound discount is when two or more discounts are applied successively. For example, a 20% discount on the original price and then an additional 10% on the already reduced price. The result is not 30%, but 28% total discount. Our calculator allows you to simulate this scenario with the second discount field.
Is tax calculated before or after the discount?
Tax is calculated on the final price after the discount. That is, if a $100 product has a 20% discount, the tax is applied on the $80, not on the original price. Our calculator already performs this calculation correctly.
Is 20% + 20% equal to 40%?
No. When two 20% discounts are applied successively, the total discount is 36%, not 40%. This is because the second 20% is calculated on the already reduced price. The formula is: 1 - (0.80 x 0.80) = 1 - 0.64 = 0.36, that is, 36%.
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