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I need an explanation of the formula: monthlyChange=(newValue-oldValue)/oldValue Why to divide by old value? Apparently the difference is described well just via subtracktion "newValue-oldValue".

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  • $\begingroup$ (newValue-oldValue)/oldValue times 100% would be the percentage change per month. $\endgroup$
    – Keith McClary
    Oct 15, 2018 at 5:28
  • $\begingroup$ The divisor is always the number that we are comparing to. So in this case, we are calculating the percent change, with respect to the old value. $\endgroup$
    – Matti P.
    Oct 15, 2018 at 5:31
  • $\begingroup$ "The divisor is always the number that we are comparing to". Why? Just subtracting is enough to see the difference i.e. change... $\endgroup$
    – Josef Klimuk
    Oct 15, 2018 at 13:34

1 Answer 1

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There exist different concepts changes:

1. $\text{Absolute change=AC=newValue-oldValue}$

Let´s inspect two cases:

a) $AC_1\text{=130-100}=30$

b) $AC_2\text{=30-10}=20$

Here $AC_1\color{red}>AC_2$.

2. Now we calculate the relative change, $RC$.

a) $RC_1=\frac{\text{130-100}}{100}=0.3=30\%$

b) $RC_2=\frac{\text{30-10}}{30}=\frac23\approx 66.67\%$

Here we have $RC_1\color{red}<RC_2$

These two concepts of measuring changes can result in different relations, but it must not. It depends on the context which concept is appropriate.

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