The value of a bike depreciates by 20% each year

why after 2 years is it not reduced by 40%?

Because it will not be 40 percent of the original, since after 20 percent is gone, the next year itll be 20 percent of the product, instead of the original, so for example, if it was 100, it would go down to 80, and then the next year it would be 20 percent of 80, not 100

Because the first year it's reduced by 20 percent.

the next year, that price that was reduced by 20, is reduced by 20 again.