Some economists suggest that an extra year of education increases a person’s wages, on average, by about 14%. Assume you could make $10 per hour with your current level of education and that inflation increases wages at a continuous rate of 3.5% per year.
(a) If you had had four more years of education, how much would you make per hour?
(b) What is the difference between your wages in 20 years’ time with and without the additional four years of education?
(c) Is the difference you found in part (b) increasing with time? If so, at what rate? (Assume the number of additional years of education stays fixed at four.)