About Relative Change Formula
The relative change formula determines the relative difference or change between two quantities while taking the "sizes" of the things being compared into account. The comparison is a unitless number given as a ratio. The relative change is a fraction that expresses the magnitude of the absolute change compared to the reference value. These ratios can be expressed as percentages by multiplying them by 100, resulting in the terms % change.
What do you mean by Relative Change Formula?
Relative change is computed by subtracting the value of the indicator in the first period from the value of the indicator in the second period, which is then divided by the value of the indicator in the first period, and the result is expressed in percentage terms. The formula for relative change is:
Relative Change = (Final value – Initial value) / Initial value * 100%
or
Relative Change = Absolute chage/ Initial value * 100%
where Absolute change = Final Value- Initial Value
Solved example of Relative Change Formula
Example: You invested $12,000 in a bank, and the value of your investment climbed to $13,000 the next year. Using the Relative Change Formula, calculate the relative change in your account balance.
Sol:
Given: Final Value =$13,000, New Value = $12,000
According to the Relative Change Formula,
Relative Change = (Final value – Initial value) / Initial value ×100%
= [(13,000 - 12,000)/12000]× 100
= 8.33%
Answer:The relative change is 8.33%.
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