Trade discount is calculated on which price refers to the price level upon which a seller reduces the price of goods sold to a buyer. For instance, if a product is listed at $100 and a 10% trade discount is offered, the discounted price becomes $90.
Trade discounts are commonly used in business-to-business (B2B) transactions and offer several benefits. They allow sellers to maintain a higher list price while providing a discount to specific customers, facilitating negotiations, and fostering long-term business relationships. Historically, trade discounts emerged in the 19th century as a way for manufacturers to streamline pricing and avoid confusion due to varying customer types and order sizes.