Thread: maths economics

hi, can someone please help me with this question, im really struggling with it.
"in a certain location, house prices are decreasing at the rate of 5% per annum. How long will they take to halve? if the rate of inflation is 5%, how long will they take to half in real terms?

Originally Posted by jwish

hi, can someone please help me with this question, im really struggling with it.
"in a certain location, house prices are decreasing at the rate of 5% per annum. How long will they take to halve? if the rate of inflation is 5%, how long will they take to half in real terms?

100%- 5%= 95% so the value is multiplied by .95 every year. If the original value is V, the value after n years is so you need to solve . The "P" cancel and taking logarithms of both sides, x log 0.95= log 0.5 so x= (log 0.95)/(log 0.5).

If inflation is 5%, then the "real" devaluation is 10%. The value of a house is multiplied by 1.00- .10= .90 each year.