In a small town, electricity prices have been rising 2% each year since 2008. Which

equation can be used to model this situation, where 0.12 is the price of electricity, per

kilowatt hour, in 2008, and p is the price t years after 2008?

Answer: p = 0.12 * (1.02) ^t

Explanation:

The general exponential growth equation is

p = A*B^t

where t is the number of years that have gone by after 2008, A is the starting amount, B is the growth multiplier, and p is the price t years after 2008

We know that A = 0.12 is the starting price

The value of B is B = 1.02 which is in the form 1+r since 1.02 = 1 + 0.02 = 1+r

The r value is r = 0.02 and it is positive to represent growth. Keep in mind that 2% = 2/100 = 0.02

So we go from

p = A*B^t

to

p = 0.12 * (1.02) ^t