High School

The average price of a movie ticket in 1970 was $3.30. Calculate the cost of a movie ticket in 1995, using the Consumer Price Index of 38.8 in 1970 and 152.4 in 1995. Round to the nearest cent.

Answer :

Final Answer:

The cost of a movie ticket in 1995, adjusted for inflation using the Consumer Price Index, would be approximately $12.83.

Explanation:

To calculate the cost of a movie ticket in 1995 adjusted for inflation, we can use the concept of the Consumer Price Index (CPI). The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

First, we need to calculate the inflation rate between 1970 and 1995:

Inflation Rate = (CPI in 1995 - CPI in 1970) / CPI in 1970

= (152.4 - 38.8) / 38.8

≈ 2.926

This means that the overall price level increased by about 292.6% between 1970 and 1995.

Next, we can use this inflation rate to adjust the average price of a movie ticket in 1970 to its equivalent value in 1995:

Cost in 1995 = Cost in 1970 * (1 + Inflation Rate)

= $3.30 * (1 + 2.926)

≈ $12.83

Rounding to the nearest cent, the cost of a movie ticket in 1995 would be approximately $12.83.

This calculation demonstrates the impact of inflation on the purchasing power of money over time, and how using the CPI can help adjust historical prices to reflect present-day values.

Learn more about Consumer Price Index

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