The price of a loaf of bread was
1 .75 in 2011 . Based on this information find the following: a . The value of the 2011 dollar in 1975 dollars . b . The value of the 1975 dollar in 2011 dollars
The Correct Answer and Explanation is:
To answer this question, we need to understand the relationship between the prices of bread in different years as a way to estimate the relative value of the dollar. If a loaf of bread cost $1.75 in 2011, we want to find the equivalent dollar value in 1975 dollars and vice versa. However, we are not given the price of bread in 1975. So, to solve this accurately, we must assume or be given the price of bread in 1975, or use inflation indices like the Consumer Price Index (CPI).
For this example, let’s assume the price of a loaf of bread in 1975 was $0.28 (a historically accurate average).
a. The value of the 2011 dollar in 1975 dollars
To find how much $1.75 in 2011 would be worth in 1975 dollars, use this proportion:Value in 1975 dollars=1975 price2011 price×2011 dollar\text{Value in 1975 dollars} = \frac{\text{1975 price}}{\text{2011 price}} \times \text{2011 dollar}Value in 1975 dollars=2011 price1975 price×2011 dollar=0.281.75×1=0.16= \frac{0.28}{1.75} \times 1 = 0.16=1.750.28×1=0.16
So, $1 in 2011 would be equal to about $0.16 in 1975 dollars.
b. The value of the 1975 dollar in 2011 dollars
To reverse the calculation:Value in 2011 dollars=1.750.28×1=6.25\text{Value in 2011 dollars} = \frac{1.75}{0.28} \times 1 = 6.25Value in 2011 dollars=0.281.75×1=6.25
So, $1 in 1975 would be worth about $6.25 in 2011 dollars.
Explanation
These calculations help understand the concept of inflation and how the purchasing power of money changes over time. In this case, the loaf of bread costing $0.28 in 1975 rose to $1.75 in 2011. That means money became less valuable over time. What you could buy for $1 in 1975 now requires $6.25 in 2011.
This is useful in comparing wages, savings, and prices over time. Understanding inflation helps people make informed financial decisions, like investing or saving for retirement.
