After calculating the expected price post-inflation, the real price increase of the product is found to be $10.50 above the inflation-adjusted price. This corresponds to a real percentage increase of 4.2% when considering an inflation rate of 5.0%.
To find the real percentage increase in the price of the product considering inflation, we must calculate the increase in price above and beyond the inflation rate. The product initially sold for $250 and increased to $273 after one year. Given an inflation rate of 5.0%, we must adjust the new price to reflect the real change in price.
First, let's find out the expected price after inflation:
- Expected price after inflation = Initial price × (1 + Inflation rate) = $250 × 1.05 = $262.50.
Now, compare the actual new price to the expected price to find the increase above inflation:
- Actual increase above inflation = Actual new price - Expected price after inflation = $273 - $262.50 = $10.50.
To find the real percentage increase:
- Real percentage increase = (Actual increase above inflation / Initial price) × 100 = ($10.50 / $250) × 100 = 4.2%
Therefore, the real percentage increase in the price of the product, accounting for inflation, is 4.2%, which is answer choice D.
The complete question is here:
A company sold its product for $250 per unit. If the same product would sell for $273 after one year and the inflation rate was 5.0%, what is the real percentage increase in the price of the product? A. 9.2% B. 8.4% C. 5.0% D. 4.2%