Lesson

9: Depreciation and inflation

Duration: 100 mins
Victorian Curriculum Link:
Mathematics: Year 10
Strand: Number and Algebra
Sub-strand: Money and financial mathematics
Content Description:
- Solve problems involving simple interest (ACMNA211)
- Connect the compound interest formula to repeated applications of simple interest using
appropriate digital technologies (ACMNA229)
- Substitute values into formulas to determine an unknown (ACMNA234)

Economics and Business: Year 10
Strand: Economic and Business Reasoning and Interpretation
Content Description:
- Generate a range of viable options, taking into account multiple perspectives, use simple costbenefit analysis to recommend and justify a course of action, and predict the intended and
unintended consequences of economic and business decisions (VCEBE028)

Learning intentions:

To develop understanding of depreciation and inflation.

To measure the effect of depreciation and inflation on prices of goods.

Success criteria:
On successful completion of this lesson, students will be able to

Identify assets that depreciate in values over time.

Relate the compound interest rate formula to calculate depreciated value of an asset.
Calculate the average rate of depreciation of a particular good over a period.
Conceptualise the value of money and inflation.
Relate the compound interest formula to inflation and calculate future cost/sell prices of a
good.
Calculate the average rate inflation over a period of time.

Detail Lesson plan:

9.1

What the teacher is doing?

Introduction to depreciation:

- Teacher forms groups of 2 students and handout

printed Asset list templates to each group.

- Teacher asks students to write name of some assets

and circle whether their prices increase or decrease
over time.

Students write the name of assets and make

their own judgement on whether their prices
increase/decrease over time.

- Teacher then encourages students to tell some of the

example assets whose price increase with time.
- Teacher then encourages students to tell some of the
example assets whose price decrease with time.
- Teacher coins the question to the class What do you
think depreciation is? and facilitate students
discussion, identify students misconceptions and leads
to the correct definition of depreciation.
9.2

9.3

9.4

What students are doing?

Time
5
mins

Students respond from their list.

Students respond from their list.

Students participate in the discussion.

Real life data collection on depreciation:

- Teacher will demonstrate how to research the change

of car values over time using the website
http://www.carsales.com.au/car-valuations/.

Students watch and repeat with the teacher.

- Teacher allocates a specific car model to each group

and asked to collect its value over the period 2008 to
2015 and fill the Car Prices template.

Students work in group and collect the data.

Calculation of %depreciation:

- Teacher will demonstrate how to calculate

%depreciation between two years with the collected
data.

Students watch and take notes.

- Teacher asks students to calculate %depreciation

between 2016 price and 1 year old, 1 year old and 2
years old, 2 years old and 3 years old prices, and so on.

Students perform the calculations.

- Teacher ask students what trend they can see in the

depreciation of car values? over this period. Teacher
facilitates students discussion and leads to the
conclusion that depreciation is not uniform over the
period.

Compound interest formula and depreciation:

- Teacher will write compound interest formula on the

board and prompt students discussion to gauge their
prior knowledge on various features of the formula
(covered at Lesson 7).

Students will participate in the discussion and

respond with their prior knowledge.

- Teacher will take an example (Say, %depreciation and

2016 car price) and apply the compound interest rate
formula to calculate the 1 year old car price.

Students will watch and take the notes.

15
mins

15
mins

Students respond with their observations.

- Teacher will then demonstrate the use of the formula

to calculate average annual %depreciate between 2016
Students will watch and take the notes.
price and 5 years old car price.

20
mins

- Teacher will engage students in discussion on their

understanding of average %depreciation.
- Teacher will then asked students to perform two
examples other than the two done by the teacher.
- Teacher will then demonstrate students the online
compound interest rate calculator Online compound
interest calculator.
- Teacher will then ask students to validate their example
calculations with the online calculator.
9.5

Students will perform the calculation.

Students will watch and practice with the
teacher.

Students will use the online calculator and test
their above calculations.

Introduction to inflation:

- Teacher will state an example, say, 5 years back the

price of 12 eggs was $2.5, and now it is $4. Then ask
students Whether the value for money increases or
decreases over this period.

Students will respond with their

understanding.

- Teacher will facilitate students discussion and leads to

the correct conclusion and hence define inflation.

Students will participate in discussion and take

notes.

- Teacher will then prompt a discussion on to compare

the concepts depreciation and inflation. Teacher
facilitate the discussion and lead to the conclusion that
depreciation is calculated for a group of similar items
whereas inflation is calculated at much larger scale,
usually, country wide.

- Teacher will then ask students to research online and

figure out rate of inflation in Australia from Australian
Reserve Bank website over various period.
9.6

Compound interest formula and inflation:

Students will participate in discussion and take

notes.



Students will search on the web and research
inflation.

Students will watch and take notes.

- Teacher will demonstrate year-by-year calculation of

new increased prices of same substance over three

years. Say, the price of one dozen of egg is $4 in 2016. If
the average inflation rate is considered 2.5% p.a., then

what will the price at 2017, 2018 and 2019.

- Then, teacher will ask what we can do other than
Students will respond with their
calculating year-by-year? and facilitate the discussion
understanding.
to lead to the conclusion that we can use compound

interest formula.

- Teacher will then ask students to repeat above
Students will perform the calculations.
calculations using compound interest formula.

- Teacher will then demonstrate students the use of
Students will watch and practice with the
online inflation rate calculator.
teacher.
- Teacher will then ask students to repeat above

calculations using the online calculator.
Students will perform the calculations.
9.7

Summarisation of key concepts:

Teacher use following cue questions and step-by-step

construct lesson summary and gauge students
understanding of key concepts learnt in the lesson:

Students will respond from the knowledge

they just learnt throughout the lesson.

What effect depreciation has on the selling price of a

good?

15
mins

20
mins

10
mins

 What effect inflation has on the buying price of a

good?
For depreciation, the interest rate in the compound
interest rate formula is positive or negative? Why?
For inflation, the interest rate in the compound
interest rate formula is positive or negative? Why?

During the discussion, teacher will identify and correct
students misconception.

Activity resources:

Asset List

Asset Name

Price over time

1.

increase / decrease

2.

increase / decrease

3.

increase / decrease

4.

increase / decrease

5.

increase / decrease

6.

increase / decrease

Car Prices

Car make and model:

Age of car

Price

Year

2016 price

4 years old

1 year old

5 years old

2 years old

6 years old

3 years old

7 years old

Price

Calculation of depreciation:

% =

% depreciation (between 2016 price and 1 year old price):

% depreciation (between 1 year old price and 2 years old price):
% depreciation (between 2 years old price and 3 years old price):

https://www.moneysmart.gov.au/tools-and-resources/calculators-andapps/compound-interest-calculator
http://www.rba.gov.au/calculator/