Let’s Talk Turkey: Inflation and the Cost of Thanksgiving Dinner

The Farm Bureau updates it’s inflation statistics on or about November 15th every year.   This lesson is based on 2022 stats and will be updated for 2024 when the Farm Bureau releases it’s numbers!  

Until then,  check out this news video and Farm Bureau article about the 2024 prices of turkey as well as the increase in the price of chicken eggs.  Lots of really good determinants of supply and demand examples for your students to think about and discuss.  For example, the price of feed (supply) , the effects of bird flu (supply), the price of substitutes – frozen vs fresh (demand) https://www.wcpo.com/money/consumer/dont-waste-your-money/turkey-prices-down-this-thanksgiving-but-why-are-egg-prices-so-clucking-high

https://www.fb.org/market-intel/avian-influenza-hits-turkeys-and-eggs-hardest

How does your family celebrate Thanksgiving? Are you joined by friends and/or family for a special feast? What do you eat? Most American families celebrate Thanksgiving by cooking turkey. According to EatTurkey.com, approx. 88 percent of U.S. households eat turkey on Thanksgiving at an average weight of 16 lbs a turkey that adds up to 736 million pounds that will be eaten this Thanksgiving.

How does your family celebrate Thanksgiving? Are you joined by friends and/or family for a special feast? What do you eat? Most American families celebrate Thanksgiving by cooking turkey. According to www.butterball.com, 90 percent of U.S. households eat turkey on Thanksgiving and 50 percent eat turkey on Christmas day.

Have you ever wondered what it costs to prepare a traditional Thanksgiving meal of turkey, stuffing, sweet potatoes, pumpkin pie, cranberries, and other goodies? The American Farm Bureau Federation (AFBF) has conducted a Thanksgiving dinner price survey for each year since 1986. Surveyed shoppers are asked to report local costs of twelve basic items found on the dinner table on Thanksgiving day. Survey responses are used to determine the average cost of a Thanksgiving dinner prepared for 10 people.

See “Cost of Classic Thanksgiving Costing More in 2022 .”

1. According to AFBF, what was the average cost of Thanksgiving dinner for 10 people in 2022?  ($64.05)
2. How does this compare to the previous year’s (2021) cost?  (It is $10.74 more than last year)

• Explain that a price index is used to measure the price level.
• Explain that a change in a price index represents inflation or deflation.
• Explain that an increase in the price level indicates inflation while a decrease in the price level is referred to as deflation.
• Explain that a price index is constructed by comparing current prices of a market basket of items to the prices of the same market basket of items in some base year.
• Inform students how to create their own price index.

• Classic Thanksgiving Dinner Costing More in 2022:  This 2022 American Farm Bureau article discusses rising agriculture prices.
  https://www.fb.org/newsroom/farm-bureau-survey-shows-thanksgiving-dinner-cost-up-20
• Consumer Price Index, 1913-:  This Federal Reserve Bank of Minneapolis website contains the Consumer Price Index from 1913 to the present day.
  https://www.minneapolisfed.org/community/financial-and-economic-education/cpi-calculator-information/consumer-price-index-and-inflation-rates-1913
• Turkey History & Trivia: EatTurkey.com provides a brief history as well as contemporary information about Thanksgiving.
  www.eatturkey.com/why-turkey/history
• Thanksgiving Price Chart for Students Print Out for Student Use
• Calculating Inflation Video https://mru.org/courses/principles-economics-macroeconomics/united-states-measure-inflation

 A Thanksgiving Market Basket

The twelve components of the survey can be thought of as a Thanksgiving market basket of items. This is similar to the procedure that is used in tabulating the monthly Consumer Price Index (CPI). The CPI measures the monthly change in the cost of a fixed market basket of items that is purchased by the typical urban household. The monthly cost of this market basket is compared to the cost of the same basket during a previous year OR a predetermined base year (this is the year in which the price index is usually set equal to 100 that is used to compare changes in economic variables).

Students can practice creating a market basket of goods using the items purchased for Thanksgiving dinner and use those numbers to create a price index.  The American Farm Bureau creates a handy list of items and their prices.  Teachers can then refer back to this process when studying the Consumer Price Index to make it more concrete for students.

A.  Create a Thanksgiving Price Index  –  Print out a copy of Thanksgiving Price Chart for Students for each student.

1. Have students add up the cost of the Thanksgiving Market Basket for 2021 and again for 2022.
2. Have students use these numbers to calculate the “Thanksgiving Price Index”. Formula:  Take the price of the Market Basket of the year of interest and divide by the price of the Market Basket of the base year, then multiply by 100.  In this case we’re interested in knowing the price index for 2022 and we plan to use 2021 as the base year.
3. By comparing the Thanksgiving price index to its base-year value, we can see how much the average price level has changed over time. We can also use two consecutive annual price index measurements to determine the rate of inflation (an increase in the average price level) or deflation (a decrease in the average price level). [Note: The Thanksgiving market basket is an illustrative example of a price index. This index should not be confused with the CPI as the ‘Thanksgiving basket’ is much smaller and thus much less representative.]

B.  Return to “Classic Thanksgiving Dinner Costing More in 2022.” The AFBF has tracked the average cost of the same basket of Thanksgiving dinner items since 1986. This allows us to make meaningful comparisons of the total costs reported in past surveys.

1. What was the cost of the Thanksgiving meal in 1986? [$28.74]
2. How does this compare to the 2022 cost? [The 2022 cost was 122.8 percent higher. 64.05 – 28.74/28.74 = 35.31/28.74 = 1.228 1.228 x 100 = 122.8%]
3. How does the 2022 Thanksgiving dinner cost compare to its value one year earlier? [It was 20% percent higher. See Farm Bureau info]

C.   How is Inflation Measured?  Explaining the CPI

1. Show the following video to students https://mru.org/courses/principles-economics-macroeconomics/united-states-measure-inflation

D  The U.S. Bureau of Labor Statistics (BLS) began collecting family expenditure data in 1917 and published its first price indexes for select cities in 1919.  The Minneapolis Fed has collected this historical data on the rate of inflation on the following site  https://www.minneapolisfed.org/community/financial-and-economic-education/cpi-calculator-information/consumer-price-index-and-inflation-rates-1913 .   The years from 1982-84 are considered the base period in the construction of the CPI. That is, 1982-84 = 100 in calculating the CPI.

1. What was the annual rate of inflation for 2021? [4.7 percent].
2. How is this calculated? [The percentage increase between the CPI in 2021 and the CPI in 2020. Formula: Inflation rate using CPI = Current year – base year divided by base year x 100.  271-258.8/258.8 = 12.2/258.8 = .0471.  .0471 x 100 = 4.7%]
3. By what percentage have consumer prices (based on 2022 estimate) increased since the base period of 1982-1984? (194.4 percent. This is the percentage increase in the current CPI (294.4) from its base year value of 100.  Inflation rate using CPI = Current year – base year divided by base year x 100.   294.4-100/100 = 194.4/100 = 1.944   1.944 x 100 = 194.4% ) 

E. 2023 will see prices drop.  Have students analyze the charts in this article and compare the date to 2022.  https://www.fb.org/market-intel/as-turkey-production-rises-prices-drop-just-in-time-for-thanksgiving

The price system in a market economy is subject to constant changes in information about the relative values of goods and services. Changes in prices are a reflection of new information being digested by the market about the supply and demand for goods. The goal of calculating inflation is to determine whether or not the changes in price are real or nominal phenomena. Given the fact that the supply of money and credit typically expanding, one can assume that over time prices will rise at some rate. However, the rate of increase is not given and can usually only be determined after the fact. By calculating the rate of inflation, individuals can determine whether or not the price increases or decreases are subject to the forces of supply and demand or if they are caused by a loss or gain in purchasing power of a currency.

Calculating The Cost Of The Thanksgiving Market Basket In Your Home 

Have students fill out the third column of the Thanksgiving Price Chart for Students  This can be done for homework or you can assign it as a group project to be done in class.  Students can go to a local supermarket or search online to collect information on the current market prices of the items in your local Thanksgiving market basket. In collecting prices for the items, select the best in-store price that you can find. Avoid using coupon specials to keep this as simple as possible. Use the price of miscellaneous items from 2021 (we will assume it has remained unchanged) in order to avoid confusion in replicating the AFBF survey.

When you students collected all of the necessary information to complete the table, have them calculate the total cost of the local market basket. Use this information to calculate the local rate of “Thanksgiving” inflation for 2022.  Assume that 2021 is the base year and the cost of the market basket was $53.31 in that year. Determine what the percentage change in the cost of the Thanksgiving dinner for 10 is this year by comparing it to the 2021!