Question

Determining the Inflation Rate. In 2013, selected automobiles had an average cost of $16,000. The average cost of those same automobiles is now $24,000. What is the rate of increase for these automobiles between the two time periods

Answer 1

The rate of increase for these automobiles between the two time periods is 50%

What is inflation?

Inflation is when there is a persistent rise in the general price levels.

Types of inflation

• Demand pull inflation –  when the demand exceeds supply, prices would increase.

• Cost push inflation – this occurs when the cost of production increases. The decrease in supply leads to a rise in price levels.

What is the rate of increase in the automobiles?

Percentage increase = (increase in prices / initial price) x 100

Increase in price = $24,000 - $16000 = $8000

Percentage increase = ($8000 / $16,000) x 100 = 50%

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