Economics

Influences of economics on renewable energy.

  Inflation

Gasoline was $0.27/gallon in 1961. In Jan. 2007, it was $2.27/gallon. In 46 years, it has risen 841%! If the cost of living represents inflation at an average of 3.5% per year, the 46-year inflation is

1.035^46 = 4.867.

The inflation increase is 4.867 - 1 = 3.867 = 386.7%.

The 1951 price of $0.27/gallon would be expressed in 2007 dollars as $0.27 x 3.867 = $1.044/gallon.

In practice, one uses the published cost of living index and computes an earlier or later equivalent. Graphs can be shown in meaningful constant dollars to analyze relative prices and price trends.

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Economics/economics.htm updated 070118