The Price of Stamps: An Excel Exploration

By Sharon K. O’Kelley

 

This is a basic exploration looking at how EXCEL can be used to do a regression and to make a prediction. The data set is based on the first class letter postage for the US Mail from 1919 to 2002.

 

year

rate(in cents)

 

 

1919

2

1932

3

1958

4

1963

5

1968

6

1971

8

1974

10

1975

13

1978

15

1981

20

1985

22

1988

25

1991

29

1994

32

1997

33

1999

34

2002

37

 

 

 

If we plot the data using EXCEL, the following graph is produced….

 

 

From the graph, it looks like we can predict that this would either be an exponential function or a power function. Using EXCEL, I can perform a regression analysis to determine which one is the better predictor of the data trend.

 

Exponential:

 

Power:

 

The trendline is most reliable when the R-squared value is close to 1. In both of the instances above, R-square is close to 1, but the exponential function has a higher value, therefore, it is a better-fitting trendline of the two.

 

The exponential function yields the following table….

 

 

Year

Rate(Cents)

1919

1.220172121

1932

2.044374615

1958

5.739039898

1963

6.999172524

1968

8.535995025

1971

9.615649536

1974

10.83186151

1975

11.2705365

1978

12.69606282

1981

14.30189336

1985

16.7632993

1988

18.88356432

1991

21.2720059

1994

23.96254368

1997

26.99338757

1999

29.22404798

2002

32.92038041

 

These values are somewhat close to the original table.

 

Predictions

1. When will the cost of a first class postage stamp reach $0.64 and $1.00?

 

Extending the table provides….

 

2019

64.65024735

2020

67.26849042

2021

69.99276861

2022

72.8273762

2023

75.77678136

2024

78.84563323

2025

82.03876924

2026

85.36122272

2027

88.81823084

2028

92.41524287

2029

96.15792878

2030

100.0521881

 

Therefore, according to this model, the stamp will cost a $0.64 around year 2019 and $1.00 around 2030.

 

3. How soon should we expect the next 3 cent increase?

 

2002

32.92038041

2003

34.25360899

2004

35.64083144

2005

37.08423443

2006

38.58609318

2007

40.14877507

2008

41.77474337

2009

43.46656106

2010

45.22689496

2011

47.05851989

2012

48.96432302

2013

50.94730846

2014

53.010602

2015

55.15745598

2016

57.39125451

2017

59.71551869

2018

62.13391227

2020

67.26849042

2021

69.99276861

2022

72.8273762

 

Based on the data, the prediction can be made that the next 3 cent increase will occur in 2017.

 

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