Question

The original price is 2.60$. If the price next year were 5% more then this years price, what would that price be? If the price dropped 5% the year after that. show that the price would not return to 2.60$. Explain the apparent paradox.

Answer 1

The second five percent drop is also taking into account the five percent increase. I have ten dollars, you have ten dollars. I'll give you half of my money, if then you give me half of yours. When you give me half of yours, not only are you giving me half of the ten that are yours, but also half of the money I gave you (in this case the five dollars)