How many levels of discounts can be applied to products or a category as a whole?

You can set unlimited pricing rules (each with different conditions) and each of them can have unlimited levels/tiers. There are multiple methods how quantities are calculated and you can choose the one that fits your case. 

Discount is applied by simply modifying the product price i.e. the old price will be replace with the adjusted one and the old one will be displayed next to it for reference (struck-through). So basically, cart and order will have line item prices adjusted.

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