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The Incredible, Edible, Egg
Easter and the Consumer Price Index
How do you
celebrate
Easter?
It’s estimated that 4 out of 5
people celebrate Easter in
America
Pop Quiz Time!
How many chocolate bunnies are
bought and sold each year for Easter?
90 million
How many peeps are bought and sold
each year for Easter?
700 million
How many jelly beans are bought and
sold each year for Easter?
16 billion
How does the average person spend
on candy each year for Easter?
$20.00
That’s enough jelly beans to
circle the Earth... 3 times.
What does this have to do with
Economics?
It’s estimated that between the Candy, Eggs, Baskets, Cards,
Gifts, Decorations, Flowers, Hats and Dinner that the
average American spends about $145 on Easter each year!
Have you ever thought about
how much it costs to make
Easter dinner? What do you
think is the average cost?
Each year, the average cost of Easter dinner (per person)
is published by BIGinsight.com
The cost is measured using a “basket” of goods (Ham,
rolls, potatoes, vegetables, etc.) that the average person
buys for Easter dinner.
2007
2008
2009
2010
2011
2012
$43.79
$49.16
$45.69
$45.41
$47.29
$50.48
Net Avg. $37.56
$41.09
$37.67
$37.45
$40.06
$44.34
Avg. of
Buyers
What does this data tell us? Why is this important even if I
don’t celebrate the Easter holiday?
The Consumer Price Index
The idea of a “basket” for Easter goods is just like a
miniature version of what we call the Consumer Price Index
(CPI).
The CPI is a monthly
The 8 Baskets:
measurement of prices - Food/Drink
- Housing
paid by urban
- Apparel
consumers for 12
- Transportation
representative basket of - Medical Care
goods that the average - Entertainment
- Education/Communication
person typically
- Other (haircuts, fees,etc.)
consumes.
So how do we calculate CPI?
Essentially, we take the average price of goods
for a given year and compare it to a base year
(currently is it is a combined 1982, 1983, and
1984).
We set the base year to a scale of 100 and then
whatever the change in the percentage of the
Consumer Price Index is, we add that or subtract
that from from the base year to create an index.
So how do we calculate CPI?
Confused? It’s simple:
What was the CPI in 2003?
184.0
If you divide the difference between 2003 and 2004
back into 2003, you get the percentage change for
2004.
188.9 - 184.0 = 4.9, then 4.9/184.0 x 100 = 2.7%
So What? Who Cares?
Purchasing
Power
Because money is inherently worthless (it’s just
paper), we are more concerned with what it can
actually buy.
When your parent angrily describes the
cheaper cost of a movie ticket in their youth,
they typically neglect their inflated income.
So What? Who Cares?
Inflation and Real GDP Growth
Managed inflation (constant and low) is good
because it encourages lending via increased
economic confidence.
Therefore, manageable inflation also
corresponds with increased real GDP,
which is good for our economy.
So What? Who Cares?
Hyperinflatio
n
In 1921, a German newspaper cost about 1/3 of a mark; two years later,
it cost 70 million marks.
This happened because the German government printed money with
reckless abandon in order to “fix” their debt.
Massive inflation destroys
economies (prices increase
from lunch to dinner).
So What? Who Cares?
Politics and Measure Over Time
Politicians often use inflation to support their cause during election
time. Easy money policies make everyone feel richer (which is good for
re-election) but eventually everyone has more money and prices go up.
Watching the inflation rate over time
also allows us to monitor prices in the
long run so that we can prepare for
economic catastrophes and attempt to
curb inflation and deflation.