MATH MISTAKES-A FEW HUNDRED MILLION, A FEW THOUSAND DOLLARS, OR A FEW CENTS. STILL A MISTAKE

The Author came across this interesting article in today’s (September 13th) SciTechDaily email of science news. The title of the Article is “When 2 plus 2 doesn't equal 4: How consumers miscalculate sale prices”.

Take the test:

Quick: You’re walking by a store window and you see a sign that says, “20% off the original price plus an additional 25% off the already reduced sale price.” So, how much is the discount?"

The wrong way (the way 59% of college students calculated the discount) to calculate the discount is to add the 20% discount and 25% discount to arrive at a 45% discount. This is of course wrong because the 25% discount comes off of a price that was already discounted 20%.

The right way is to take the first discount of 20% and then take the 25% discount off of the discounted figure. Here’s the easy way:

The item, a “Family Guy” life-size figure of Lois, has an original price of $100. You are buying the figure as a birthday present for Glenn Quagmire. However, the sign says that the figure is discounted 20%. And there is a bigger sign in the store that says you can take an additional 25% discount off of any item.

$100 * 20% (.2) = $20.
$100-$20 discount = $80

$80 * 25%(.25) = $20

$20(original discount) +$20(25% discount from $80) = $40 discount, or a 40% discount.

The research above comes from a study posted in the Journal of Consumer Research (October 2007).

The researchers’ state:

Retailers frequently use the strategy of double discounts for their regular promotions or to induce customers to open a credit card account with them. Such errors in peoples’ judgments of the net effect of multiple price discounts . . . have implications for a variety of marketing settings including advertising, promotion, pricing, and public policy,” write Haipeng (Allan) Chen (University of Miami) and Akshay R. Rao (University of Minnesota)

SMALL MISTAKES LEAD TO BIGGER ONES

In many of the articles discussing the subprime loan collapse, borrowers state that they did not understand the mortgage documents they were signing or that they did not understand the formulas that would be used to calculate new payment amounts. The Author has some sympathy for these folks, but it is incumbent upon them to understand the basic financial terms of their loans. If they do not understand they must ask to have the formulas explained. (Want to bet that the loan officials may not understand the formulas? But the Author snarkily digresses).


A “STUPID” MISTAKE COSTS A FEW HUNDRED MILLION. AND DESTROYS A MARS PROBE

The Mars Climate Orbiter was launched in 1998. It was a mission to explore the climate of Mars. The mission failed, however, because data provided to the Mars Climate Orbiter was provided in an imperial measurement of “pound force”, rather than in Newton’s, the metric measurement that Mars Climate Orbiter expected.

This last example is not so much a math mistake as a critical design flaw. If the US would join the world community and use the metric system as its primary measurement system, this error may not have happened. But the US probably has good reasons to retain the imperial system, in the company of such other world leaders as Liberia and Myanmar as they cling to the illogical imperial system of weights and measures.

METRIC IS THE MEASURE OF ALL THINGS IN THE DESERT OF THE REAL!