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A lower price
per unit a company charges in exchange for the purchase of a large number of units. For example, if the usual price
for a product is $5 per unit and a buyer
asks to purchase 10,000 units, the company may offer a quantity discount and only charge $3 per unit. Quantity discounts exist to encourage large orders, which, while they may reduce profit margin
, increase revenue
and therefore raw profit
quantity discount a price reduction from a supplier's LIST PRICE given to buyers of products according to the quantities that they purchase. Such BULK-BUYING discounts are often termed ‘trade discounts’, and they could be based on the size of a single order or could take the form of an AGGREGATED REBATE on the volume of cumulative purchases over a period of time. Quantity discounts are used both to secure orders against competitors and by encouraging larger, less frequent orders, to reduce the supplier's order and delivery cost.