Explaining difference between a percentage between dates

[marenello99]

I am trying to explain why there is a difference between a percentage increase happening each year between two (or more) dates and then when comparing the overall increase between the start and finish date. For example

1980 - £25,000 sales;
1981 - £26,000 sales; = 4% increase
1982 - £27,000 sales. = 3.85% increase

When adding up the yearly increase it comes to 7.85%, but the difference between the 1980 number and the 1982 number is 8%. I know why this happens, but I need to explain why in very simple language, so anyone accessing a file can understand!

 

[stapel]

I am trying to explain why there is a difference between a percentage increase happening each year between two (or more) dates and then when comparing the overall increase between the start and finish date. For example

1980 - £25,000 sales;
1981 - £26,000 sales; = 4% increase
1982 - £27,000 sales. = 3.85% increase

When adding up the yearly increase it comes to 7.85%, but the difference between the 1980 number and the 1982 number is 8%. I know why this happens, but I need to explain why in very simple language, so anyone accessing a file can understand!

Use what you learned about compound rates (such as successive discounts) and think about what you know about compounded interest (such as the interest this year being on the original amount plus the interest awarded on that amount last year).

 

[Parkerrush92]

The key here is year over year.