Interactive Monday: Inflation/Deflation
Inflation is one of those economic phenomena that most people underestimate. Why? When prices change 2-3% a year, it's hard to notice. Over a decade or two, those small annual changes compound and become significant.
The Official Data Foundation has an inflation calculator by product category which provides a multitude of opportunities to demonstrate to your students inflationary changes since 2000 (which may coincide with your students' birth dates.
A few activity ideas:
1. Why is the rate of inflation so different for various product categories?
- To demonstrate how product categories can have such different rates of inflation (or deflation). For example:
- What might explain rates of inflation in a given product category? Some ideas: level of competition, rate of technological change, supply/demand dynamics, manufacturing cost improvements, customer preferences. You might have students do some quick research to find explanations for growth in college tuition prices and declines in TV prices.
- What is the trend? Increasing or decreasing?
Here's a graph that accompanies each product category too:
2. How much have teen-related products changed in price since my birthdate? Note that on the product pages you can change the starting year for the analysis:
Here are a few teen-centric products that you might have your students research from the CPI-based categories.
You can also have them create their own list of 10-15 items that are in their lives. Here's a spreadsheet to complete for this activity and links to a few product categories:
- Admission to movies, theaters and concerts
- Carbonated drinks
- Fresh Fruits and Vegetables
- New Cars
- Pet Food
Here's an NGPF Activity using this interactive tool called Analyze: Understanding Inflation
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.
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