Quantity Discount - Definition & Meaning
What is Quantity Discount?
A form of discount generally given to the buyers to persuade them to buy goods / services in larger quantity is called quantity discount. Buying goods in larger quantities generally results in lower cost of production per unit item due to economies of scale. Hence incentivizing the buyers to buy larger quantity of goods is one of the most important tools used by wholesalers and retailers alike.
There are two types of quantity discount offered to the buyers.
1. All units discount: In such a case, above a certain level Q, all the units are offered at a discount.
For e.g. consider the following table showing the prices of mobile phones when purchased in bulk
|
Quantity |
Price per unit (INR) |
|
50 |
10000 |
|
50-75 |
9600 |
|
75-100 |
9300 |
2. Incremental Discounts: Here the discount is applied to only those units which are purchased above a certain threshold Q. The first Q units are not discounted.
For e.g. for the first 50 guitars, one will be charged INR 20000. For every guitar above 50, one will be given a discount of INR 2000
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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