Extrapolation definition
/What is Extrapolation?
Extrapolation is the process of extending a trend into the future, or of applying the results of a sample to an entire population. Extrapolation has a relatively high risk of generating incorrect results, since it assumes that the current data points are recurring, which may not be the case. The risk of generating incorrect results through extrapolation is reduced in cases where there are no current indicators of changes in the current data set.
Examples of Extrapolation
Here are several examples of the manner in which the extrapolation concept can be used:
Sales extrapolation. A historical trend of 10% gains in sales for the last five years could be extrapolated into the future at the same rate.
Expense extrapolation. A manager could extrapolate the current 4% annual rate of pay increases into the future, for the purpose of designing a response to a union demand for increased wages.
Error rate extrapolation. An auditor could extrapolate a 2% invoice error rate from a sample to the entire population of invoices.