Answer to Question #136971 in Microeconomics for Jj

Question

When buying an item at the store, you receive $9.25 back in change from the $30 you gave the cashier. If the tax rate t is 5.5%, what is the pre-tax price p? Round off to the nearest cent.

Answer 1

Solution:

$Pre-tax \;price \;(p) = TP-[(\frac{TP}{1+r} ) \times r]$

$Where \;TP=Total \;Price \;paid$

$r= Tax\; rate$

$TP=\$30-\$9.25=\$20.75$

$r=5.5\%$

$p=20.75-[(\frac{20.75}{1+0.055} ) \times 0.055]$

$p=20.75-1.08$

$p=19.67$

$Pre-tax\; price (p)=\$19.67$