*Updated for 2024* Let’s Talk Turkey: Inflation and the Cost of Thanksgiving Dinner

• 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.

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 “Thanksgiving Dinner Costs are Down Again”

1. According to AFBF, what was the average cost of Thanksgiving dinner for 10 people in 2024?  ($58.08)
2. How does this compare to the previous year’s (2023) cost?  (It is down about 5% from last year.  However it is istill 19% higher than five years ago.)

• Classic Thanksgiving Dinner Costs Are Down Again:  This 2024 American Farm Bureau article discusses the costs of preparing a Thanksgiving Dinner.
  https://www.fb.org/market-intel/thanksgiving-dinner-costs-are-down-again
• 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 (2024) 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 2023 and again for 2024.
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 2024 and we plan to use 2023 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 ““Thanksgiving Dinner Costs are Down Again”.” 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. The cost of the Thanksgiving meal in 1986 was $28.74.   How does this compare to the 2024 cost? [The 2024 cost was 122.8 percent higher. 58.08 – 28.74/28.74 = 29.34/28.74 = 1.02 1.02 x 100 = 102%]  
2. Show students the slide of costs adjust for inflation.  https://www.fb.org/market-intel/thanksgiving-dinner-costs-are-down-again  Why is important to adjust for inflation when looking at the prices over time?   [When adjusted for inflation – or if your dollar had the same overall purchasing power as a consumer in 1984, right before the beginning of this survey – this would be the least expensive Thanksgiving meal in the 39-year history of the AFBF Thanksgiving survey, other than the outlier of 2020. Even with the decreasing purchasing power of the dollar because of inflation, some of the goods in our basket are at their long-term lowest prices, even in terms of the “current dollar” price. Cranberries are the second-lowest, following only last year’s large drop in price, since 2015. ]
3. How does the 2024 Thanksgiving dinner cost compare to its value one year earlier? [It was 5% percent lower. 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 2024? [3.2 percent].
2. How is this calculated? [The percentage increase between the CPI in 2023 and the CPI in 2024. Formula: Inflation rate using CPI = Current year – base year divided by base year x 100.  314.4 – 304.7/304.7 = 9.7/304.7 = .0318.  .0318 x 100 = 3.2%]
3. By what percentage have consumer prices (based on 2024 estimate) increased since the base period of 1982-1984? (214.4 percent. This is the percentage increase in the current CPI (314.4) from its base year value of 100.  Inflation rate using CPI = Current year – base year divided by base year x 100.   314.4-100/100 = 214.4/100 = 2.144   2.144 x 100 = 214.4% ) 

E. How affordable is food in terms of wages?  How does the US compare to other nations around the world?  [American consumers spent 6.7% of their expenditures on food in 2022, including food eaten away from home or takeout, the lowest percentage in the world. For comparison, the food share of expenditures is 8.5% in the United Kingdom, 16.2% in Brazil and up to 59% in developing countries like Nigeria.]

F. Did Amercans have to work fewer hours or more hours as compared to 2023 to be able to buy this year’s Thanksgiving dinner?  [Fewer hours.The average American also has to work fewer hours to buy the same meal than in previous years. Wages continued to grow faster following the COVID-19 pandemic, even as inflation cooled. Because average wages rose 4% from 2023 to 2024, it took 9% less work time for us to pay for this year’s Thanksgiving dinner.] 

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.

As an extension,   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

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.

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 2024.  Assume that 2023  is the base year and the cost of the market basket was $61.17 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 2023!