SubjectsArts & Humanities
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Brief DescriptionStudents compare prices of goods across the century in this lesson that introduces the concept of inflation.
Keywordsdata, consumer, money, Consumer Price Index, CPI, inflation, graph, table, chart, gasoline, food, currency
In this lesson, students learn about the Consumer Price Index (CPI). They graph changes over time to the cost of common goods and use an online CPI calculator to estimate the cost of goods in other eras.
Students have probably heard or read news reports in which the word inflation was used. They probably have heard about the Consumer Price Index (CPI) too. Simply stated, the CPI compares the cost of a series of goods or services purchased by members of the average household.
The Bureau of Labor Statistics (BLS), the group responsible for tracking the costs of those goods, monitors more than 200 categories of goods or services arranged into eight major groups. According to the BLS Web site, major groups and examples of categories in each are as follows:
The average cost of all those goods is monitored on a weekly, monthly, and yearly basis. The CPI is the percent by which the average cost of all those goods and services increases during a specified period of time. This is also referred to as the inflation rate.
Ready to Calculate?
You might start with the Inflation Calculator on the Web site of the Bureau of Labor Statistics. (Scroll down to click the link to the "Inflation Calculator and a small calculator will pop up.) The calculator enables you to compare the buying power of your money today with its buying power in past years. For example, to compare buying power of the money it costs to buy a product (say, a loaf of bread) today and 100 years ago, enter in the first window of the Inflation Calculator the cost of that loaf of bread this week (say, $2.59) and select the current (or a recent) year from the first drop-down menu. Then select from the second drop-down menu the year to which you wish to compare current prices; then click Calculate. You will learn that the equivalent buying power of the $2.59 you spent this week for a loaf of bread.
Here are two more online tools that will accomplish a similar purpose to the Inflation Calculator above:
Be sure students understand that those calculators will not provide precise costs of goods in different eras; they provide only estimates of relative value/buying power of a specified amount of money based on changes in the average cost of all goods and services (the CPI) over time. Above, we used the example of a loaf of bread. The calculators indicate that the $1.95 we spent this week on a loaf of bread has the same buying power as 11 cents had in 1913. That does not mean that a loaf of bread cost 11 cents in 1913. It might have -- if the cost of bread followed precisely the CPI/rate of inflation (the average cost of all goods over time); but most products would not follow inflation that exactly. What we can say is that the money spent to buy a loaf of bread last week had the same buying power of 11 cents in 1913.
It is also important that students keep all calculations in perspective. In 1913, people earned far less money than they earn today. Even though they made much less, the money they made probably had about the same buying power as our money does today; in 1913, people probably complained when the newspaper went up a penny as much as we do when it goes up a dime!
While the CPI calculator is not the best tool to use to make cost or salary comparisons, you might use it to approximate the relative buying power of a persons salary through history. Use the calculator to learn that a salary of $50,000 in 2001 might have had the same buying power as a salary of about $2,750 had in 1913. Stated another way, if a person made $2,750 dollars in 1913 and received annual raises that matched exactly the rate of inflation/CPI -- and if that person was still alive today! -- he or she would be making about $50,000.
The important concepts for students to derive from this lesson and their use of the online CPI tools is that the cost of goods changes over time and that the CPI can be used to "guess-timate the relative value/buying power of goods over time. That way, when a student reads that in the 1960s a loaf of bread cost 25 cents, they should not simply respond, "Boy, I wish I lived in 1960! They should understand that, although the cost of most goods has increased over time, average income also has increased; todays salaries have the same buying power as a lesser amount (an amount tied to the CPI/rate of inflation) in the 1960s.
Note: Be cautious about letting students draw conclusions such as "the computer I paid $1,500 for last month would have cost about $342 if I bought it 30 years ago" or "a gallon of gasoline that costs $1.57 today would have cost 24 cents in 1952." First off, re-emphasize that, while statements such as those about some products might be true, most goods to not "follow inflation that exactly. Additionally, we cannot compare the buying power of computers in that way because computers were not available to consumers 30 years ago. And, as for gasoline, there are many variables that such a statement does not consider, including:
Additional Resources & Activities
CPI Average Price Data
Weekly Gasoline Prices
What Was the Inflation Rate Then?
In the computer lab, you might provide the cost of a product students might buy (for example, a paperback book or a pair of shoes) and have students use one of the online calculators to estimate the relative cost of that item across the years.
Lesson Plan Source
FINE ARTS: Visual Arts
NA-VA.K-4.6 Making Connections Between Visual Arts and Other Disciplines
NA-VA.5-8.6 Making Connections Between Visual Arts and Other Disciplines
NA-VA.9-12.6 Making Connections Between Visual Arts and Other Disciplines
NM-NUM.3-5.1 Understand Numbers, Ways of Representing Numbers, Relationships Among Numbers, and Number Systems
NM-NUM.6-8.1 Understand Numbers, Ways of Representing Numbers, Relationships Among Numbers, and Number Systems
NM-NUM.9-12.1 Understand Numbers, Ways of Representing Numbers, Relationships Among Numbers, and Number Systems
NM-ALG.6-8.1 Understand Patterns, Relations, and Functions
NM-ALG.6-8.4Analyze Change in Various Contexts
NM-ALG.9-12.1 Understand Patterns, Relations, and Functions
NM-ALG.9-12.4 Analyze Change in Various Contexts
NM-DATA.3-5.3 Develop and Evaluate Inferences and Predictions That Are Based on Data
NM-DATA.6-8.3 Develop and Evaluate Inferences and Predictions That Are Based on Data
NM-DATA.9-12.3 Develop and Evaluate Inferences and Predictions That Are Based on Data
NM-CONN.PK-12.3 Recognize and Apply Mathematics in Contexts Outside of Mathematics
NM-REP.PK-12.3 Use Representations to Model and Interpret Physical, Social, and Mathematical Phenomena
NSS-EC.K-4.7 Markets and Market Prices
NSS-EC.K-4.8 Supply and Demand
NSS-EC.K-4.13 Income and Earning
NSS-EC.5-8.7 Markets and Market Prices
NSS-EC.5-8.8 Supply and Demand
NSS-EC.5-8.10 Market Institutions
NSS-EC.5-8.13 Income and Earning
NSS-EC.9-12.7 Markets and Market Prices
NSS-EC.9-12.8 Supply and Demand
NSS-EC.9-12.10 Market Institutions
NSS-USH.K-4.3 The History of the United States: Democratic Principles and Values and the People from Many Cultures Who Contributed to Its Cultural, Economic, and Political Heritage
NSS-USH.5-12.7 Era 7: The Emergence of Modern America (1890-1930)
NSS-USH.5-12.8 Era 8: The Great Depression and World War II (1929-1945)
NSS-USH.5-12.9 Era 9: Postwar United States (1945 to early 1970s)
NSS-USH.5-12.10 Era 10: Contemporary United States (1968 to the Present)
NT.K-12.1 Basic Operations and Concepts
NT.K-12.4 Technology Communications tools
NT.K-12.5 Technology Research tools
Return to this weeks Lesson Planning article, Were In the Money!.
Originally published 02/07/2003
Last updated 11/25/2008