6.(30) Elmer Working did a study of US meat demand. From his data I have taken p

Question

6.(30) Elmer Working did a study of US meat demand. From his data I have taken per capita pork consumption in pounds per person (PQ), pork price (PP), beef price (BP), both in nominal cents per pound, the consumer price index (CPI, 1935-1939=100), and disposable income per capita (INC) in nominal dollars. The data is in the file: Pork.Working.xlsx. Use the CPI to turn the prices and income into real dollars in the sheet named Real Data.

The real data sheet is blank. I don't understand how I am supposed to use the CPI to turn prices into real dollars. Please show how you were able to do it. I posted the data from excel below:

Year PQ BP PP CPI INC 1913 66.3 16.01 15.5 70.7 69.2 1914 64.6 16.66 15.84 71.8 67.8 1915 66.1 16.28 14.95 72.5 71.1 1916 68.4 17.28 16.49 77.9 82.4 1917 58.2 20.49 22.71 91.6 97.8 1918 58.3 25.82 28.35 107.5 109.4 1919 62.7 26.97 30.64 123.8 122 1920 63.1 27.11 29.98 143.3 126.6 1921 64.3 23.26 25.07 127.7 98.8 1922 65.3 21.9 24.02 119.7 104.5 1923 73.7 22.62 22.22 121.9 118.9 1924 73.5 23.15 22.12 122.2 118.1 1925 66.3 24.14 26.61 125.4 123.1 1926 63.7 24.74 28.96 126.4 126 1927 67.3 25.84 26.49 124 124.8 1928 70.5 29.43 24.91 122.6 126.4 1929 69.2 30.86 25.8 122.5 132 1930 66.6 28.49 24.98 119.4 116.9 1931 67.9 23.55 20.8 108.7 99.1 1932 70.3 19.54 14.68 97.6 74.7 1933 69.2 16.88 13.65 92.4 70.2 1934 62.7 18.34 17.34 95.7 79.9 1935 48.1 24.12 23.89 98.1 88.9 1936 54.8 22.69 23.67 99.1 100.7 1937 55.4 25.88 24.37 102.7 107.6 1938 57.8 22.97 21.87 100.8 98.3 1939 64.2 23.68 20.21 99.4 104.5 1940 71.9 24.16 18.26 100.2 111.8 1941 67.1 25.92 22.52 105.2 134.5 1942 63.1 28.94 26.99 116.6 168.9 1943 78.5 29.48 26.99 123.7 188.9 1944 79.1 27.92 25.2 125.7 207.1 1945 66.2 27.36 24.93 128.6 210.6 1946 75.4 35.36 33.22 139.5 219.2 1947 69.1 50.76 48.01 159.6 229.4 1948 67.4 61.38 49.63 171.9 250.6 1949 67.3 56.11 45.68 170.2 245 1950 68.6 31.73 45.1 171.9 264.8 1951 71.2 72.33 48.07 185.6 284.5 1952 72.2 72.92 47.37 189.8 292.2

Explanation / Answer

Your question is a fairly common concept and the most common ways to deal with them is given in the web-links below. You should have a base year where the CPI has a default value of 100.

Follow the links below:

http://itech.fgcu.edu/faculty/bhobbs/Nominal%20Real%20Price%20Index.htm

http://qrc.depaul.edu/StudyGuide2009/Notes/CPI/cpihandout.htm

https://www.dallasfed.org/research/basics/nominal.aspx

Hope this helps.

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