25%+30% always=55% what type of conclusion will lead toerror?

Question

it is easy to assume that 25%+30% is always equal to 55%. I need a specific example of what kind of problem or setting in which this kind of conclusion can lead to an error?

Answer 1

It depends on how the percentages are added.

Suppose the price of an item is originally $1000. The price is marked up by 25% so the price becomes $1250.

Later it is marked up by 30% making the new price $1625. The net increase is therefore 62.5%, not 55%.

In this scenario the percentages are compounded rather than simply added.