📊 How to Calculate Percentage Increase and Decrease (Simply Explained)

Percentage change calculations appear constantly in everyday life — salary raises, price changes, growth statistics — yet many people make consistent calculation errors that lead to misunderstanding the actual magnitude of change.

The Correct Formula

Percentage change = ((New Value - Old Value) / Old Value) × 100. This formula works for both increases (positive result) and decreases (negative result). The critical detail many people get wrong: you always divide by the ORIGINAL (old) value, not the new value, since percentage change describes the change relative to your starting point.

A Worked Example

Salary increases from 80,000 to 96,000 rupees. Change = 96,000 - 80,000 = 16,000. Percentage change = 16,000 / 80,000 × 100 = 20%. This is correctly described as a 20% increase, calculated relative to the original 80,000 salary, not the new 96,000 figure.

The Common Mistake: Reversibility Confusion

A frequent error: assuming a 20% increase followed by a 20% decrease returns to the original value. It does not. Starting at 100, a 20% increase brings you to 120. A subsequent 20% decrease of 120 (not of the original 100) is 24, bringing you to 96 — not back to 100. This asymmetry surprises many people but follows directly from the formula always referencing the current original value at each calculation step.

Percentage Points vs Percentage Change

These are often confused but mean different things. If an interest rate moves from 5% to 7%, this is a 2 percentage point increase, but a 40% percentage change ((7-5)/5 × 100 = 40%). Financial and statistical reporting should specify which measure is being used, since conflating them creates significant misunderstanding about the actual magnitude of change being described.

Practical Applications

Understanding percentage change correctly helps with: evaluating salary negotiations and raises accurately, understanding investment returns and losses, interpreting price changes and inflation figures, and correctly reading statistical reports in news media, which sometimes conflate percentage points and percentage change in ways that can mislead readers about actual magnitudes.