Let the original price be 100 units for ease of calculation. A 20% increase raises the price to 120 units. A subsequent 20% decrease is applied to this new price, so the reduction is 20% of 120, which is 24. Subtracting 24 from 120 gives 96. The final price is therefore 96, which is 4 units less than the original 100, indicating a net decrease of 4%.
Option A:
Option A, 0% change, would be correct only if an increase and an equal decrease cancelled each other exactly, but this happens only when both percentages are applied to the same base value. Here the decrease is applied to an already increased price.
Option B:
Option B, 2% decrease, underestimates the net effect and would arise from a miscalculation or an incorrect averaging of percentages without considering the changed base.
Option C:
Option C accurately tracks the price through both changes and compares the final value with the initial value. The computation demonstrates that the successive operations do not cancel out but instead yield a 4% net decrease.
Option D:
Option D, 6% decrease, overstates the net reduction and cannot be derived from the multiplicative factors 1.2 and 0.8 that represent the two changes.
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