X= 1200$ The price decreased 20% after 1 year to become price y : Y= 0.8x = 0.8 (1200) = 960$ In the year after y also decreased 20% to be price y’: Y’= 0.8y = 0.8 (960) = 768 $ The price y’ then decreased 20% to become price y’’: Y’’ = 0.8 y’ = 0.8 (768) = 614.4 $ Then the price will be 614.4 $ after 3 years
We know that every year, the value depreciates 20%. Thus, the new value at the end of each year is equal to 80% of the old value. As a result, the value in 3 years is equal to multiplying the original value (1200) by 80% 3 times. As 80%=0.8, 1200*(0.8)^3=614.4 is our answer
