The following table shows the average retail price of milk a

The following table shows the average retail price of milk and the Consumer Price Index from 1980 to 1998.

Year

1980

1985

1990

1995

1998

CPI

100

130.58

158.62

184.95

197.82

Retail price of milk

$1.05

$1.13

$1.39

$1.48

$1.61

Real price of milk in 1980 dollars

Calculate the real price of milk in different years in terms of 1980 dollars by filling out the table above.

Has the real price increased/decreased/stayed the same since 1980?

Solution

Real price of butter in year X = .

1980           1985             1990           1995              1998

1.05           0.87                 0.88             0.8                 0.82

Since 1980 the real price of butter has decreased