Was Babe Ruth Underpaid?

SWBAT O Define Consumer Price Index O Understand why it is important to use constant dollar figures to make comparisons O Understand how CPI relates to purchasing power.

The Great Bambino (Babe Ruth) O Babe Ruth Babe Ruth O In 1931 Babe Ruth was paid $80,000 per year, the average player now makes about $2,300,000 O Do you think he was overpaid, or underpaid?

How can we decide whether he was underpaid or overpaid? O Using the Consumer Price Index we can better make this comparison O What is the CPI? O A price index determined by measuring the price of a standard group of goods meant to represent the typical “market basket” of a typical urban consumer.

How is CPI used? O To see how prices have changed over time, in other words, how has purchasing power changed. O In one word, INFLATION O How does this help us answer our question?

Formula O Salary in constant dollars=Salary in current dollars (old year)*(cpi in recent year/cpi in old year) O How do we find the CPI?CPI O $80,000* (239.7/15.2)= O $1,261, O So was Babe Ruth underpaid? O Current MLB Players Current MLB Players

Practice O Salary in constant dollars=Salary in current dollars (old year)*(cpi in recent year/cpi in old year) O President Truman made $100,000 in 1949, president Obama makes $400,000 in Who makes more? O Legendary Colts quarterback, Johnny Unitas, made $7,000 in Is this more than the $535,000 current quarterback, Peyton Manning makes? (This is from when Peyton played for the Colts 2005) O Michael Jordan made $33,140,000 during the season. How much would this be in 2015 dollars?

Do you have any other comparisons you would like to calculate? O Inflation Calculator Inflation Calculator

Conclusion O Define Consumer Price Index O Understand why it is important to use constant dollar figures to make comparisons O Understand how CPI relates to purchasing power.