24. In 2005 the Government Accountability Office issued a study of textbook pric

Question

24. In 2005 the Government Accountability Office issued a study of textbook prices. The report noted that in the preceding two decades textbook prices had been rising at the rate of 6% per year, roughly double the annual inflation rate of about 3% a year Assuming textbook prices continue to rise at 6% per year. ifa textbook costs $80 in 2005, what will it cost in 201 h. A lextbook that was first published in 1990 costs $120 ince 1990 its price has increased at the r 1 5 ts pric per year. What was its price in 1990?

Explanation / Answer

24)

a)

C(t) =Co(1+r)t , where C(t) is cost after t years , r = rate of increase , Co is initial cost

t=0 corresponds to year 2005

in 2015, t=2015-2005 =10

Co=80 ,r=6% =0.06

=>C(10) =80*(1+0.06)10

=>C(10) =143.27

in 2015, textbook cost is 143.27 dollars approximately

b)

in 1990, t=0

in 2010, t=2010-1990 =20

r=6%=0.06

C(20)= 120

=>120 =Co(1+0.06)20

=>120 =Co(1.06)20

=>Co =120/(1.06)20

=>Co =37.416567

cost of textbook in 1990 is 37.4 dollars approximately

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