Homework: Percents and Housing Prices

A. Introduction:

Notice that if A is increased by 38% then we get A + (38% of A)
which equals A + (0.38)A
which equals (1)A + (0.38)A
which equals (1 + 0.38)A
which equals (1.38)A.

Therefore, to increase the price of an item by 38% we just multiply the original price by 1.38 -- and this method works for "percent increase" problems besides price increases, of course.

Notice also that if we want to decrease B by 13% we want to replace B by

Finally, suppose we want to know by what percent $18 must decrease to arrive at $14.04?

14.04 / 18 = 0.78 on our calculator. Thus, 18 must be multiplied by 0.78 to arrive at 14.04. Which means that 18 must be decreased by 22% to arrive at 14.04

B - (13% of B)
which equals B - (0.13)B
which equals (1)B - (0.13)B
which equals (1 - 0.13)B
which equals (0.87)B

B. Homework Exercise:

Suppose that from 1/1/05 to 12/31/05, the median home price increased by 17%. Suppose that during the next year (Jan to Dec 2006), the median home price increased by 21%.

  1. What was the total percent increase from Jan 2005 to the end of 2006? "Between 1/1/05 and 12/31/06, the median home price increased by _____%" Use a calculator and use the above observations, suitably modified.

  2. Suppose that the median price of homes decreased by 24% during the year 2007. Suppose forecasters expected home prices to eventually drop (say during 2008 or so) to where they were on 1/1/2005. By what additional percent would the median home price have eneeded to drop?

    (Suggestion: pretend that on 1/1/05 the median home price was $100. What would the median price have been on January 1, 2007? Then, answer: What would the median price have been on December 31, 2007?

    Finally what additional percentage decrease would have been needed to get your preceding answer, to come down to $100?)