1

Vladimir bought a car for $250000$ USD. He has two models to describe the car's loss of value.

Model 1: $y=250000-25000x$.

Model 2: $y=250000 \cdot 0.8^x$

where $y$ is the cost and $x$ is the amount of years that have passed since the purchase. What are the differences between the models?

I know that there is a difference when it comes to the $\%$ amount changes, but are there more key differences?

N. F. Taussig
  • 76,571
didnotcomeuptosomething
  • 177

1 Answers1

0

The model-1 says, the value of the thing will go down 10% of the original value each year.

The model-2 says, the value of the thing will go down 20% of the current value each year.

It implies that,

The model-1 says, the value of the thing will be none after 10 years.

The model-2 says, the value of the thing will go down much faster than model-1 in the beginning, but will slow down later and the thing will not be a piece of junk in many years since its original value is so high.

PdotWang
  • 749