Chapter 8 - McGill Faculty of Engineering MIME 310...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
1 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials Chapter 8. Inflation
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials 8.1 The current money price of a commodity has evolved as shown in the table below. Variations due to inflation must be removed from the prices. Therefore, convert all prices into 1990 $, the most recent year. For the 1980 price of 135: Using the GDP index as a measure of inflation, determine how the real price of the commodity has evolved over the period. 135 (277 / 125) = $299 expressed in 1990 $ Year Price GDP Index 1980 135 125 1981 141 137 1982 148 151 1983 156 166 1984 163 183 1985 172 199 1986 182 215 1987 217 233 1988 253 247 1989 281 261 1990 328 277
Background image of page 2
3 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials * Multiplier: Index 1990 / Index Year x = 277 / Index Year x The best way of visualising price trends is to plot the price series. 328 1.000 1990 298 1.061 1989 284 1.121 1988 258 1.189 1987 234 1.288 1986 239 1.392 1985 247 1.514 1984 260 1.669 1983 271 1.834 1982 285 2.022 1981 299 2.216 1980 Price in 1990 $ Multiplier * Year
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials 100 150 200 250 300 350 1978 1980 1982 1984 1986 1988 1990 1992 YEAR PRICE ($) The constant money price decreased until 1986, down to 78% of its original value, and increased thereafter to reach the maximum of the period (140% of its lowest value in 1986, and 9% more than its starting value in 1980). § Average annual rate of change from 1980 to 1986: (234 / 299) 1/6 - 1 = - 4.0% § Average annual rate of change from 1986 to 1990: (328 / 234) 0.25 - 1 = 8.8% § Average annual rate of change from 1980 to 1990: (328 / 299) 0.1 - 1 = 0.9% 234 299 328 Current $ Constant 1990 $
Background image of page 4
5 McGill Faculty of Engineering MIME 310
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 12

Chapter 8 - McGill Faculty of Engineering MIME 310...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online