Question

How do I find the equation to graph housing inflation over time if the inflation rate is 2.37% a year and the current cost of the house is 224200 Thank you

Answer 1

To calculate inflation, the following equation is given

`i=((p_2)/(p_1))^(1/n)-1`

where i represents the inflation rate(in decimals), p1 the starting value of the house, p2 the value of the house after a amount of n years.

If we use this equation for a house with a current cost of $224,200 and an inflation of 2.37%, we're going to have

`0.0237=((p_2)/(224200))^(1/n)-1`

To calculate the how much the house will be worth in 2 years, we substitute n for 2 and solve for p2.

`\begin{gathered} 0.0237=((p_2)/(224200))^(1/2)-1 \\ 1.0237=((p_2)/(224200))^(1/2) \\ 1.0237^2=((p_2)/(224200)) \\ p_2=1.0237^2\cdot224200 \\ p_2=234953.010898 \\ p_2\approx234953.01 \end{gathered}`