How To Calculate Percentage Change (With Examples)

If you’ve ever wondered how much “$10 off your next purchase” really means, or how to compare the hours you worked last week to your overtime hours, percentage change might just give you some insight.

After all, percentages are useful because they allow us to compare relative quantities of groups, and in the case of percentage change, we can measure changes in those relative quantities over time.

So, to learn more about percentage change and its benefits, this article will address what exactly a percentage change is, why it’s important, and how you can calculate it.

What Is Percentage Change?

Simply put, percentage change is a mathematical concept that shows a change over time. This can be anything from prices to time itself. And, it can represent a negative or positive change. As would be expected, positive values will indicate a percentage increase (e.g., a price raise), whereas negative values indicate a percentage decrease (e.g., a price cut).

Percentage change is extremely useful in the world of finance, as one of the most important things it can represent is security.

Security represents any kind of tradable financial asset. Forms of security include debt securities, equity securities, and derivatives. In the case of percentage change, you can track the price of security.

You can use the percentage change formula to track individual securities, the value of currencies, and more. Used more simply, percentage change can also tell you how much the price of a product has increased or how much extra pizza you bought.

Overall, it’s an incredibly useful concept for companies and individuals alike!

Percentage Change Formula

Luckily, the formula for calculating percentage change isn’t very complex. First, find the difference between the two values you want to compare. Next, you divide the increase or decrease by the first initial value. Then, after multiplying that by 100 to get a percentage, you’re all set.

Here’s the formula for percentage increase:

Here’s the formula for percentage decrease:

How to Calculate Percentage Step-by-Step

To better understand how to go about calculating percentage change, try following these step-by-step guides:

Percentage Increase

1. First, as mentioned, calculate the difference between the initial value and the final value. This will allow you to find how much it’s increased. (increase = final value − initial value)

2. Next, divide the increase by the initial value. This will give you a decimal. (decimal = increase ÷ initial value)

3. Multiply the decimal you receive by 100 to get a percentage. (% increase = decimal × 100)

This calculation is meant to represent a percentage increase, but if the percentage you get is negative, that would mean that the percentage change is a decrease.

Percentage Decrease

1. First, calculate the difference between the initial value and the final value, but in reverse from the previous steps. This will allow you to find how much it’s decreased. (increase = initial value − final value)

2. Next, divide the increase by the initial value. This will give you a decimal. (decimal = decrease ÷ initial value)

3. Multiply the decimal you receive by 100 to get a percentage. (% increase = decimal × 100)

This calculation is meant to represent a percentage decrease, but if the percentage you get is negative, that would mean that the percentage change is an increase.

Real-Life Examples of Percentage Change

1. In this first example, consider the following:

   James wanted to buy a $22 bowl set but didn’t have money at the time. When he returns to buy the same set, the price has increased to $26. James wants to know just how much the price has increased, as he doesn’t want to buy it if it’s increased by more than 20%.

   We can use percentage change to find just that. In this case, we’re looking for the percentage increase.

   1. First, calculate the difference between $22 (the initial value) and $26 (the final value). This will allow you to find how much the price has increased. ($26 − $22 = $4)

   2. Next, divide the $4 by the $22. This will give you a decimal. ($4 ÷ $22 = 0.18)

   3. Multiply the 0.18 by 100 to get a percentage. (0.18 × 100 = 18%)

   In this case, James will still buy the bowls because their price increase didn’t exceed 20%.

2. In this next example, we’ll examine how to calculate the percentage change of time as a resource.

   Paul is working on a new product for his small business and wants to understand better how he should price it. To do this, he’s going to find the percentage change between how long it took him to make an old, similar product vs. this new product. Therefore, he can increase the price by the percentage change.

   The old product took 5 hours to make, whereas the new product takes 7 hours to make. How much is he going to increase the price? In this case, we’re looking for the percentage increase.

   1. First, calculate the difference between 5 hours (the initial value) and 7 hours (the final value). This will allow you to find how much the price has increased. (7 − 5 = 2)

   2. Next, divide the two by the 5. This will give you a decimal. (2 ÷ 5 = 0.40)

   3. Multiply the 0.40 by 100 to get a percentage. (0.40 × 100 = 40%)

   In this case, Paul should increase the price of his new product by 40%.

3. In this last example, let’s use the real-life values of the U.S. dollar to show how its value has inflated over time.

   The currency of the United States has experienced inflation over a long period. This has decreased its value. $100 in 2010 is equal to $124.60 today.

   How much has the value of the dollar inflated in the past ten years?

   1. First, calculate the difference between $100 (the initial value) and $124.60 (the final value). This will allow you to find how much the value of the dollar has decreased. ($124.60 − $100 = $24.60)

   2. Next, divide the $24.60 by the $100, this will give you a decimal. ($24.60 ÷ $100 = 0.246)

   3. Multiply the 0.246 by 100 to get a percentage. (0.246 × 100 = 24.6%)

   In this case, the calculation was rather easy, but it shows that the value of the U.S. has been inflated by 24.6%.

The Financial Value of Percentages

As shown, percentage change is a great tool for calculating the value of time, products, currency, and more. It’s easy to calculate and can be useful for companies and individuals alike.

With that in mind, it’s worth noting that there are tons of ways percentages can be useful in financial situations. Here are some of the most common and useful ways percentages are employed:

• Growth Rate

• Inflation Rate

• Marginal Utility

• Interest

• Variable Cost

• Fixed Cost

• APR

And more! As you can see, there are a plethora of ways you can use percentages to your advantage. Exciting, right?

Author

Jack Flynn

Jack Flynn is a writer for Zippia. In his professional career he’s written over 100 research papers, articles and blog posts. Some of his most popular published works include his writing about economic terms and research into job classifications. Jack received his BS from Hampshire College.