Maths-
General
Easy

Question

After a new car is purchased, the value of the car is modeled by a function that decreases exponentially over time. Which of the following could describe how the value of the car changes each year?

  1. Each year, the value of the car is $800 more than the previous year.    
  2. Each year, the value of the car is $800 less than the previous year.    
  3. Each year, the value of the car is 8% more than the previous year.    
  4. Each year, the value of the car is 8% less than the previous year.    

The correct answer is: Each year, the value of the car is 8% less than the previous year.


    Exponential change in prices of a car is strictly relative to the price of every individual car.
    Explanations:
    Step 1 of 2:
    In the question, it is mentioned that the value of the car decreases exponentially over time. So, option A and option C are ruled out of consideration since they both states that the value increases over the previous year.
    Now, for option B and option D, let us clarify the given situations with an example.
    Suppose the prices of two cars are, car1 = $3000 and car2 = $2500.
    Then as stated in option B, each year, the value of the car is $800 less than the previous year.
    ∴ car1 = $11000 - $800 = $10200.
    ∴ car2 = $8000 - $800 = $7200.
    And according to option D, each year, the value of the car is 8% less than the previous year.
    ∴ car1 = $11000 × (1 - 8%) = $11000 - $880 = $10120.
    ∴ car2 = $8000 × (1 - 8%) = $8000 - $640 = $7360.
    Step 2 of 2:
    As per option B, if the value drops at a constant rate the change would be a linear change.
    But as per option D, the change in value is relative to the prices of individual car and that would be an exponential change. As the price of the car goes up in the time of purchase, the value of the car decreases more each year.
    Final Answer:
    The right choice is — Each year, the value of the car is 8% less than the previous year.

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