A gallon of milk cost $2.75 in 1999 when the CPI(Consumer price index) was 166.6. How much should it have cost in 1980 when the CPI was 82.4?


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The assumption is that milk, as a commodity, would assume a price point in some proportion of the CPI. By that assumption, in 1999 one gallon of milk cost 0.0165066026410564 times the CPI. By that same ratio it would be expected to cost $1.37 by a CPI of 82.4.

Problem is, that was not the price of milk in 1980. I worked in the grocery business in 1981 and distinctly remember that the price of a gallon, depending on which variety (2%, 3.5%, etc) being one side or another of $2.00. One source corroborates that at $2.16 in 1980.
http://www.1980sflashback.com/1980/Economy.asp Basically the price of milk rose much more slowly than inflation.

The food business in USA is an efficient industry. Competition forces prices down. Suppliers and retailers must always find efficiencies to get more done at lower cost and pass on any such efficiencies to consumers. Meanwhile, other things like the cost of secondary and higher education, forced up by the greediness of teachers' unions, inflated administration and support payrolls, and ever growing accountability-free government dollars, grow way faster than any index of inflation.

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