Question

Use the following price level data to answer this question.

• 1920: 10
• 1950: 50
• 1980: 500
• 2009: 1,000
If a movie cost a nickel in 1920. How much is that in 2009 dollars?

A) $1.25
B) $2.50
C) $5.00
D) $10.00
E) $20.00

Answer 1

To calculate the price of a movie ticket from 1920 in 2009 dollars, you need to adjust for inflation using the Consumer Price Index (CPI). The price level in 1920 was 10 and in 2009 it was 1,000, so the inflation factor is 100. Option C is correct.

Step-by-step explanation:

To calculate the price of a movie ticket from 1920 in 2009 dollars, you need to adjust for inflation. You can use a price index to measure how the general level of prices has changed over time. In this case, we can use the Consumer Price Index (CPI) to calculate the inflation factor.

The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. By comparing the CPI in 1920 and 2009, we can calculate how much prices have increased.

In 1920, the price level was 10, and in 2009, it was 1,000. To calculate the inflation factor, divide the price level in 2009 by the price level in 1920: 1,000 / 10 = 100.

Now, to find the price of a movie ticket in 2009 dollars, multiply the original price in 1920 (a nickel, or $0.05) by the inflation factor: $0.05 * 100 = $5.00.

Therefore, the cost of a movie ticket in 2009 dollars would be $5.00.

To find the price in 2009 dollars, multiply the original price of a nickel by the inflation factor, resulting in a cost of $5.00.