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Average retail price and the consumer Price Index

Table illustrates the average retail price of milk and the Consumer Price Index from the year 1980 to 1998.

42_Average retail price and the consumer Price Index.png

Compute the real price of milk in the year 1980 dollars. Has the real price increased/decreased/stayed the similar since the year 1980?
Real price of milk in year X =CPI1980 /CPI year X nominal price in year 1980

                    1980 $1.05        1985 $0.86            1990 $0.88     1995 $0.80  1998 $0.81

Since 1980 the real price of milk has reduced.

 

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