Assume the price of salt increased from $0.30 in 1985 to $0.50 in 1995.If we calculate the average rate of price increase for salt over this period,we could accurately say the
A) price of salt increased at about a 40 percent rate per year during this period.
B) price of salt increased at about a 20 percent rate per year during this period.
C) price of salt increased by about 20 percent total during this period.
D) price of salt increased at about a 5 percent rate per year during this period.
E) real price of salt definitely increased during the period.

Question

Quizplus · Accepted Answer

To calculate the average rate of price increase, we need to find the difference between the two prices and divide by the original price, then divide that result by the number of years between the two prices. 
($0.50-$0.30)/$0.30 = $0.20/$0.30 = 0.67. This means that the price increased by 67% over the 10-year period. 
To find the average rate of increase per year, we divide 0.67 by 10: 0.67/10 = 0.067 or 6.7%. Therefore, the price of salt increased at about a 5% rate per year during this period. 
Choice A is incorrect because it assumes that the 40% increase is a yearly rate. 
Choice B is incorrect because it assumes that the 20% increase is a yearly rate. 
Choice C is incorrect because it only calculates the percentage increase, not the rate of increase per year. 
Choice E may be true, but it is not directly related to the question asked.

Assume the Price of Salt Increased from $0