Inflation is currently causing the cost of items to increase by about 2.5% per year. In 2009 a litre of gasoline costs approximately $0.90. What will it cost to fill a 60 litre gas tank 10 years from now. Round your answer to the nearest dollar. Name at least one thing other than inflation that determines the cost to the consumer of any article (not just gasoline).
This is worth 5 marks and need some help answering it clearly and precisely. I was gonna use supply/demand but i don't know if that would work.
-Dan
Today it costs $54 to fill tank. In one year (per cent increase problem):
(x - 54)/54 = .025, so x = $55.35
in the next year:
(x - $55.35)/$55.35 = .025, so x = $56.73
Do this 8 more times, and you will get your answer: $69.12
I used an Excel worksheet to generate the answer. Not sure if there's a formula to solve this or not.
There is a formula, called the standard future value formula:
54 * (1 + .025)^10 = future value = $69.12
To calculate the cost to fill a 60 litre gas tank 10 years from now, we need to consider both inflation and other factors that determine the cost to the consumer.
First, we'll address the inflation component. Given that inflation is causing the cost of items to increase by 2.5% per year, we can calculate the future cost of gasoline.
To do this, we need to compound the inflation rate over 10 years. The formula to calculate compound interest is as follows:
Future Value = Present Value * (1 + Inflation Rate)^Number of Years
In this case, the present value is $0.90 (the cost of a litre of gasoline in 2009), the inflation rate is 2.5% (0.025 as a decimal), and the number of years is 10. Plugging these values into the formula, we get:
Future Cost of Gasoline = $0.90 * (1 + 0.025)^10
Calculating this expression, we find that the future cost of a litre of gasoline will be approximately $1.13.
To calculate the cost to fill a 60 litre gas tank, we simply multiply the future cost of gasoline by the tank capacity:
Future Cost of Filling a 60 Litre Gas Tank = 60 litres * $1.13 per litre = $67.80
Therefore, it will cost around $67.80 to fill a 60 litre gas tank 10 years from now, considering the inflation rate of 2.5% per year.
Now, let's address the second part of the question. Other than inflation, various factors can influence the cost to the consumer of any article, including gasoline. One significant factor is supply and demand. When the supply of gasoline is higher than the demand, prices tend to go down, and vice versa. Other factors include taxes, transportation costs, crude oil prices, refinery capacity, government regulations and subsidies, and geopolitical events that can impact oil production.
By considering all these factors, along with the inflation rate, you can provide a comprehensive answer that demonstrates a deeper understanding of the topic and potentially earn higher marks.