APPLYING THE CONCEPTS #3: How do we compute
percentage changes?
In the 1970s the government of Mexico City repainted the highway lane lines on the
Viaducto to transform a 4-lane highway into a six-lane highway.
▪ The government announced that the highway capacity had increased by 50% (equal to 2
divided by 4).
▪ Unfortunately, the number of collisions and traffic fatalities increased, and one year later
the government restored the 4-lane highway and announced that the capacity had
decreased by 33% (equal to 2 divided by 6)
▪ The government announced the net effect of the two changes was an increase in highway
capacity by 17% (equal to 50% minus 33%).
This anecdote reveals a potential problem with using the simple approach to compute
percentage changes. Because the initial value (the denominator) changes, the computation
of percentage increases and decreases are not symmetric.
In contrast, if the government had used the midpoint method, the percentage increase in
capacity would be 40% (equal to 2 divided by 5). The same as the percentage decrease. In
that case, we get the more sensible result that the net effect of the two changes is zero.