Determine the rate of inflation on growth in price.

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Shay_16

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The average price of a gallon of milk in 1980 was about $1.60. By the year 2016, the average price was $2.96. Determine the rate of inflation on growth in price.
 
Shay_16 said:
The average price of a gallon of milk in 1980 was about $1.60. By the year 2016, the average price was $2.96. Determine the rate of inflation on growth in price.
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Hint: Price increased from $1.60 to $2.96. What was the % increase?

Please show us what you have tried and exactly where you are stuck.

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Please share your work/thoughts about this problem.
 
I am stuck after I find the difference between the 2.96 - 1.60. Would I divide 1.60/1.36 (increase / original)?
 
If you are after the percentage increase in the price from 1980 to 2016, then you would calculate increase/ original ie 1.36/1.60. You have written it the other way around.
However, if this is an MC question with choices 1%, 2%, 3%, 4%, then that is not what the question is asking. It seems to be asking for the average inflation rate per year.
So that I know the best way to help you, I need to know what you have learnt. Have you learnt the Future Value from Present Value formula, or the compound interest formula. What unit of work is the question a part of?
 
You calculated the percentage increase in the price of milk over 36 years. However, rates of inflation are usually calculated for relatively short periods such as a month or a year. (During hyper-inflations, by the day.) So, given the nature of the answers given, you must have been asked to find the average rate of inflation for some period. What period? Did the problem say “average”?

More importantly, what have you been taught about computing average rates of change?
 
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