According to the U.S. Bureau of Labor Statistics, prices for apples are 4,561.18% higher in 2024 versus 1939 (a $59.75 difference in value).

The current national average price is $1.31 for “Apples, Red Delicious, per lb. (453.6 gm)”. This data is collected by a national survey and can vary from region to region.

Between 1939 and 2024: Apples experienced an inflation rate of 4.62% per year. This rate of change indicates significant inflation. In other words, apples costing $1.31 in the year 1939 would cost $61.06 in 2024 for an equivalent purchase. Compared to the overall inflation rate of 3.73% during this same period, inflation for apples was higher.

Quite mind altering right? Well, we often find many financial concepts a little bit complex and tough to understand. There are very clear reasons. First of them is the concepts are often inter connected with relativity. Words like “if”, “When” make take things another step further from the general understanding.

Earlier in the mid 20th century, grabbing apples and enjoying them with family members hardly demanded for the urges to understand financial concepts like inflation. While in 2024 it has became a national problem and even palying like am Ace in the debates of presidential debates of 2024. So we have choosen the topic over 20 others just to make an out of the box approach to this concept.

We will be discussing about the reasons for a hypothetical basket of goods used to measure inflation. Stay tuned. We will just be talking no exam after will be there after the discussion.

What is Inflation?

We have hundrteds of thousands of definition of Infaltion out there in the internet and we will not start by repeating them another time, rather lets see a real life example,

In the earlier years of the millennium the price of a dozens of egg were $0.93, today  the same quantity may cost you upto $5.5. This phenomena is described as price hike, what is inflation than? Actually, Inflation is not a phenomenon itself, it is just the reason behind price hikes. 

In the earlier years of 2000’s, with nearly $1 you could buy dozens(12 pieces) of apple, Today in 2024 with the same amount of money you may get on 2-3 pisces of apples. The purchase power or transactional value of an Unit of money has decreased this is Inflation. As the price of things will get more higher the purchase power will be decreased further. It is a chain and this is the most dangerous side of inflation. It is always tends to cause more problems than the past years.

For some who would love a formal definition I would go with the definition by, Investopedia,

“Inflation is a gradual loss of purchasing power that is reflected in a broad rise in prices for goods and services over time. The inflation rate is calculated as the average price increase of a basket of selected goods and services over one year. High inflation means that prices are increasing quickly, while low inflation means that prices are growing more slowly. Inflation can be contrasted with deflation, which occurs when prices decline and purchasing power increases.” quite long isn’t it?

Reasons of Hypothetical Basket of Goods Used to Measure Inflation?

The basket of goods is important to consider because it provides a measure of inflation and the cost of living. By tracking notable changes in the prices of items in the basket, economists can measure how much more or less consumers are paying for goods and services over time.

What Items Are Typically Included in a Basket of Goods?

Common goods include food products like bread and milk, housing costs such as rent and utilities, transportation expenses like gasoline, healthcare services, and personal care items.

How Often Is the Basket of Goods Updated?

Updates may occur annually or biennially, depending on the economic agency’s best practices. This process involves reviewing and adjusting the items included in the basket based on changes in consumer behavior, new products, and shifts in spending habits. The government agency dictating the basket of goods often publishes research on the change.

The Bottom Line

A basket of goods is a collection of items used to measure changes in the cost of living and inflation by tracking the prices of commonly consumed goods and services over time. It reflects consumer spending patterns and is used to calculate economic indicators like the CPI.