Concepts: Technological progress, innovation, creative-destruction process, CPI, consumer needs
Background: Stranger Things is set in the 1980s, when walkie-talkies, phone booths, portable media players such as the Walkman and boomboxes were widely popular.
Question 1: Think of the items you use to call your friends and listen to music. What changed since the 80s, and how does it affect our daily life?
Question 2: What else do you do with your smartphones? What would you have to buy to replace your smartphones if smartphones were not available anymore? Altogether, would it be more or less expensive than a smartphone? What is the impact of the introduction of new goods, such as smartphones, on the CPI?
Concepts: CPI, real prices, inflation rate, real wage
Background: In 1985, Steve works at an ice cream parlor "Scoops Ahoy." A single scoop of ice cream with a wafer cone costs $1.25. Today, the same treat would cost $3.78 at a similar ice cream parlor in the U.S. (e.g., Baskin Robbins). Steve tells Robin, "I make three bucks an hour, and I have no future."
Question 1 (Let’s Use Data): The consumer price index (CPI) is used to measure the average price of a basket of goods and services bought by a typical American consumer. Research the CPI in 1985 and today, and calculate the real price of an ice cream scoop in 1985. To answer this question, you may use the CPI values from the BLS website. Is the CPI a perfect measure of the cost of living?
Question 2 (Let’s Use Data): Compare the minimum wage increase in Indiana since 1985 and compare it to the inflation rate. You may use the state minimum wage rate for Indiana from the FRED website.
Concepts: Inflation, deflation, CPI, real price, exchange rate, purchasing power parity, Balassa-Samuelson effect.
Background: In Sacred Games, we follow Gaitonde’s path to organized crimes through the mid-1980s. We witness his life at the end of Indira Gandhi’s state of emergency that lasted from 1975 to 1977. In 1977, Ganesh worked at an upscale restaurant, where a meal cost 12 rupees.
Question 1: To better understand Ganesh’s socio-economic background, let’s review these two years of emergency using data. First, define the terms ‘inflation’ and ‘deflation,’ then find the inflation rates in India from 1974 to 1977. Did the economic situation improve during the state of emergency? To answer the question, you may use the values from the World Bank’s website.
Question 2 (Let’s Use Data): First, find the 1977 and this year’s values of the Indian consumer price index (CPI) to calculate the real price of the restaurant meal in 1977 (12 rupees). Second, use the current exchange rate to find the price equivalent in U.S. dollars. Compare this price with your favorite restaurant meal.