Confused!
So here is the question:
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).
For the mathematical portion, what would be the correct answer?
A = (0.9(1+0.25)^(10)) (60)
60 = # of litres
earlier portion of equation = cost of gas (per litre)
OR
Is the answer..
math - Wayne, Tuesday, April 2, 2013 at 4:35pm
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.
math - Wayne, Tuesday, April 2, 2013 at 4:40pm
There is a formula, called the standard future value formula:
54 * (1 + .025)^10 = future value = $69.12
Thanks,
the price increases exponentially
that is,
if it increases 2.5% this year, then next year it will increase 2.5% on the NEW amount
so if 2009 ----> 90 cents
10 years later ,
cost = 90(1.025)^10 = 115.20 cents or $1.152
so to fill a 60 L tank would cost
60(1.152) = $69.12 or $69 to the nearest dollar.
BTW, yesterday I paid $1.223 / L in Ontario, the lowest in many weeks.
They are both the same.
The problem with the first is that 2.5% = 0.025, not 0.25, which is 25%.
After all, (0.9)(60)=54
and that is the only difference between the two answers, aside from the typo.
Wow thanks guys, perfect feedback.
Much appreciated
To calculate the cost to fill a 60 litre gas tank 10 years from now, taking into account the annual 2.5% increase due to inflation, you can use the formula for future value. The formula is:
Future Value = Present Value * (1 + Interest Rate)^Number of Periods
In this case, the present value is $54 (the cost to fill the tank today) and the interest rate is 2.5% per year. The number of periods is 10 years.
Using the formula:
Future Value = $54 * (1 + 0.025)^10 = $69.117
Rounding to the nearest dollar, the cost to fill a 60 litre gas tank 10 years from now would be $69.
Additionally, other factors that determine the cost to the consumer of any article, including gasoline, are:
1. Supply and demand: If the demand for gasoline exceeds the supply, the price is likely to increase. Conversely, if the supply exceeds the demand, the price may decrease.
2. Taxes: Governments may impose taxes on gasoline, which can significantly affect the cost to the consumer.
3. Distribution costs: Transportation and distribution costs between the source and the consumer can impact the final price.
4. Crude oil prices: Gasoline is derived from crude oil, so changes in the price of crude oil on the global market can affect the cost of gasoline to the consumer.
5. Refinery capacity and maintenance: Issues related to refinery capacity or maintenance can impact the availability and price of gasoline.