Midterm Extra Credit 1. This assignment is worth 6 points of your 74 point midterm. Assuming you receive all 6 points, how much will your midterm percentage change? 6/74 =.08

2. Let’s say you and your pal take the midterm and your percentage score is 20% greater than her percentage score. Let’s say you received a 90%, what was her percentage score? 90-x /x =.2 → 90=1.2x → x = 75% OR… 90 = (1+.2)x → x = 75%

All degreesAssociatesBachelor'sMaster'sProfessionalDoctoral Male Female Total a. Make a single graph to answer this question: In 2006 what percentage of all degree-earning males and what percentage of all degree-earning females earned a Doctoral degree?

CPI Consumer Price Index

Prices typically go up – inflation Guess the price of a Hershey’s Bar in 1962… Right…$0.05 Now? Right … $1.00

Percentage increase in price of items from 1962 to 1998 Item Percentage Increase in Price Hershey bar1180% New York Times1100% First class postage700% Gasoline (gallon)284% Hamburger (McDonald's double) 861% Chevrolet (full size)790% Refrigerator freezer60%

Consumer Price Index Prices change but how do we keep track of the changes? CPI is a measure of the general change in prices over a given amount of time. Look at CPI

Components of the CPI Housing41.4% Transportation17.8% Food16.2% Energy8.2% Medical Care6.4% Apparel and Upkeep6.1% Other3.9%

Look at CPI Calculate inflation from 2005 to 2006 You calculate inflation from 1929 to 1930

Ratio of two indices 2006 to 2005 The consumer goods of 2006 cost 1.03 times that of 2005 on average.

CPI The value of the dollar changes how do we compare prices (actual dollars)? We can use the CPI to adjust prices (constant dollars) so that we can accurately compare them. Actual Dollars = an absolute dollar (price) value Constant dollars = value of a dollar (price) relative to the value of a dollar in a specific year.

Converting to Constant Dollars The general formula is

The average baseball player's salary in 1970 was $29,303 and in 2005 the average baseball player made $2,632,655. In terms of actual dollars the salaries of baseball players have certainly gone up. But in terms of constant dollars do baseball players today make more or less than they did in 1970?

1. Find the CPI values for your two years (2005 and 1970) 2. We want to compare the 1970 salary to the 2005 salary so 29,303 is the “old price” or old salary. Converting to Constant Dollars

Earlier we found that the inflation rate from 2005 to 2006 was 3%. If your boss in 2005 said that over the next year you were going to get a 2% raise would that make you smile? Why or why not?

“Expensive” You can check to see if some good increased in price at the same rate as the CPI or at a slower or faster rate. For example, the price of gasoline in 1981 was $1.38 per gallon on average. In 2005, it averaged $2.30. Was gasoline more expensive or less expensive in 2005?

“Expensive” Need to take inflation into consideration. Let’s convert the 1981 price to 2005 constant dollars.

“Expensive” Since $2.96 is more than the $2.30 that people were actually paying in 2005, gasoline was more expensive in 1981 than it was in 2005 after we account for inflation using constant dollars. Put another way, the $1.38 you were spending in 1981 was affecting you more than the $2.30 you are spending in 2005.

Constant Dollar Let’s say in you’re Aunt tells you that in 1990 she was making $50,000. Let’s see what that translates to for 2006 dollars… $ in 1990 is equivalent to $ in Year CPI =

Constant Dollar Year CPI =

“Expensive” Compare the price of gas in 1990 which was $1.16 to the price of gas in 2000 which was $1.51. Again, nominally, the price in 2000 is larger than the price in 1990, but that is to be expected. When did it "feel" more expensive to buy gas? Convert the 1990 price to its 2000 constant dollar equivalent by multiplying the 1990 price by the ratio of the CPI values in 2000 and 1990:

“Expensive” $1.53 > $1.51 so gas was more expensive in 1990 Year CPI =