Page 304 buy four times as much in 1962 as it will

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Unformatted text preview: at producers are willing and able to supply at different price levels. Page 304 buy four times as much in 1962 as it will buy today? To get some idea of what a $100,000 salary in 1962 would equal in today’s dollars, economists use the following formula: Salary in today’s dollars Salary in earlier year (CPItoday /CPI1962) Suppose that by “today” we mean 2005. We want to find out what Kennedy’s 1962 salary is equal to in 2005 dollars. The CPI in April 2005 was 194.6, and the CPI in 1962 was about 30. Filling in the formula, we see that Kennedy’s salary in 1962 is equivalent to earning $648,667 in 2005. Salary in today’s dollars $100,000 (194.6/30) $648,667 President Kennedy, in 1962, earned more than the president today earns, in terms of purchasing (left to right) and the supply in a market with an upward-sloping supply curve (left to right). As you may recall, equilibrium price and quantity in a market (the point at which the demand curve and the supply curve intersect) are determined by the forces of supply and demand. What holds for a market holds for an economy,...
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This document was uploaded on 01/16/2014.

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