Homework SourseSuppose that a gallon of milk costs 4 today and that a dozen
Suppose that a gallon of milk costs $4 today and that a dozen eggs costs $1.50. Assume that the price of milk increases at a rate of 2% each year and that the price of eggs increases at a rate of 3% each year. If the inflation rates of these items do not change, how much will each of these items cost in 10, 20, 30, 40, and 50 years?
Suppose that a gallon of milk costs $4 today and that a dozen eggs costs $1.50. Assume that the price of milk increases at a rate of 2% each year and that the price of eggs increases at a rate of 3% each year. If the inflation rates of these items do not change, how much will each of these items cost in 10, 20, 30, 40, and 50 years?
Solution
A gallon of milk costs $4 today and that a dozen eggs costs $1.50
Price of milk increases at a rate of 2% each year and that the price of eggs increases at a rate of 3% each year.
In 10 years:
Price of milk:
4(1+0.02)^10 = $4.87
Price of eggs:
1.5(1+0.03)^10 = $2.01
In 20 years:
Price of milk:
4(1+0.02)^20 = $5.94
Price of eggs:
1.5(1+0.03)^20 = $2.709
Similarly it can be calculated for 30, 40, 50 years
