If you're seeing this message, it means we're having trouble loading external resources on our website.

If you're behind a web filter, please make sure that the domains ***.kastatic.org** and ***.kasandbox.org** are unblocked.

Main content

Current time:0:00Total duration:4:51

I'm pretty sure you have a friend who's always asking hey do you have an extra pen I forgot to bring mine I've asked that single question probably more than any other question of us in school and luckily there's always a nice sweet person who carries an extra pen who gives it to you now you look at this happening with a guys like me and then you decide that you have an idea a business idea so you say that I'm gonna buy a few extra pins and keep them you're gonna buy a few pens and keep them and when one of us needs it you're gonna sell it to us so let's say you bought the pen for 10 rupees and you keep them with you and then when one day when when we need that pen you say hey here it is and you can have a dough for 12 rupees 12 rupees and you say that you know I went to the shop I did all this work so I need these extra 2 rupees and we need the pen so let's say we buy it so what you've done here is buy the 10 rupees so the price you bought it has another name it's the cost right so it's called the cost price cost price and sometimes I wonder why it's called the cost price isn't it just a cost but I guess this works so cost price is CP for short and what the price you sold it for it's called the selling price selling price which makes sense the price at which you sell is the selling price and which is also written as SP for short so that we don't have to write this big word again and again and when your selling price is more than your cost price like over here you are a clever businessman so you have SP minus CP is greater than zero when this happens in other words SP minus CP greater than zero is another way of saying SP is greater than s P is greater than CP so when that happens we say that you've made a profit the price you sold it for is bigger than the price you bought it for and how much is that profit so we calculate that by just calculating what is SP minus CP in this case that's 12 minus 10 so SP minus CP and that's equal to 2 rupees and that 2 rupees is called your profit now you could have done it another way you could have said hey I'm just selling this and just doing this for fun I went to the shop anyway I don't really need extra money so just give me ten rupees for your pen and when you do this then what you've done is just sold it such that the selling price equals the cost price and in this case your your profit is zero rupees profit is zero rupees now you could have done it another way as well if you think about it what you could have done is that maybe you suddenly needed some money and you know you were hungry and you wanted to go to the canteen and you did not have any money but everybody had a pen that day so nobody really wanted to buy a pen so you thought about it you said you know what I know nobody here needs a pen but I'm gonna give this pen that I bought for 10 rupees for 9 rupees and you know that there are people who no matter even if they do have a pen they cannot resist such a discount so they say okay I'm gonna buy one and then now what you've done is sold the spends such that the selling price is actually less than the cost price now you might have done this for many reasons but when you do this what you've done is called make a loss because your selling price was lower than you cos price you bought it for 10 but sold it for just 9 and in this case how much is that loss the loss is because the cost price is bigger than the selling price we say the CP minus the SP and that's equal to one rupee a loss of one rupee over here it was the SP minus the CP which was equal to a gain or a prophet a prophet is also called again sometimes a gain of two rupees now if you're comfortable with negative numbers there's another way to look at this very similar but just slightly different way so you can ask yourself from 10 from my cost price what should I do to get to my selling price and if the answer is add to you do 10 plus 2 to go to 12 if you see a plus 2 here then you can say it's a plus so it's a profit and the amount of the profit is 2 rupees if you see a plus 0 or if you want you can put a minus 0 there then whatever it is as long as you see a 0 just a 0 over here you can say it's the profit nor a loss so zero rupees and if you have to go from ten to nine what must you do 10 minus 1 is 9 so you write 10 minus 1 over here 10 minus 1 equals 9 then you can say okay I have to subtract to go to my selling price then I see a negative sign so a negative means loss and how much is that loss it's one rupee