1 . Suppose the year-to-year price increases from 2008 to 2014 are as shown in t
ID: 1114956 • Letter: 1
Question
1. Suppose the year-to-year price increases from 2008 to 2014 are as shown in the following chart:
Year
2008 .
2009
2010
2011
2012
2013
2014
% increase in prices over previous year
1.87%
– 0.75%
3.31%
1.56%
2.01%
1.95%
1.12%
1a. If an item cost $1000 in 2007, how much does it cost in 2014. [Hint: see problem #1 from the Class 23/24 worksheet.]
1b. What is the overall growth factor for the 7-year time period from 2007 to 2014?
Year
2008 .
2009
2010
2011
2012
2013
2014
% increase in prices over previous year
1.87%
– 0.75%
3.31%
1.56%
2.01%
1.95%
1.12%
Explanation / Answer
1a. If an item cost $1000 in 2007, how much does it cost in 2014
=1000*(1+1.87%)*(1-0.75%)*(1+3.31%)*(1+1.56%)*(1+2.01%)*(1+1.95%)*(1+1.12%)
=1115.60
1b. What is the overall growth factor for the 7-year time period from 2007 to 2014?
=1115.60/1000
=1.1156 or 11.56% in percentage terms
the above are the answers
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