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Opens on Chapter 15’s example: Juniper’s movie ticket: $8.00 when the (invented) price index was 80, $12 now at 125.
Per person (optional)
A rise over several years
A pay rise
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How it works
An old amount in today’s money is old × index now ÷ index then. The real change compares the new price with that. A rise of T over n years is (1 + T)^(1 ÷ n) − 1 a year, a little less than T ÷ n. A real pay rise is (new ÷ old) ÷ (index now ÷ index then) − 1; subtracting the two percents is only a shortcut. The index here is an example, not a real price index.
From the book, Chapter 15. $8.00 then is $12.50 in today’s money, so the $12 ticket is 4% cheaper in real terms, though 50% dearer in plain dollars. The library’s budget per person fell from $43.10 (today’s money) to $32.81, down 24%. 21% over four years is 4.9% a year, not 5.25%. Pay up 8.3% with prices up 5% is a real rise of 3.1%. Every chapter and its calculator →
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