Equal but Opposite Percentage Changes Do Not Cancel
Equal but Opposite Percentage Changes Do Not Cancel
Equal percentage increases and decreases do not cancel. The resulting change, , is always less than the initial value. For example, if you make 50% on an investment and then lose 50%, the result is a loss of 25%: . Going the other way, to make up for a loss of 50%, you need to make 100%, not just 50%.
(1-p)(p+1)
(1+1/2)(1-1/2)=3/2×1/2=3/4