The Money PagesWhy Does the Same Pizza Cost More?
Ruby and Leo have $12 for pizza. This year, it costs $15. What changed?
“The pizza has grown,” Ruby said.
Leo looked at the box. “Same size.”
“Then the price has grown.”
Last year, their group bought a pizza for $12 after a neighborhood cleanup. This year, the same pizza cost $15. They had brought $12 again.
They were $3 short.
One pizza isn't every price
“Is this inflation?” Leo asked.
The shop owner said flour, cheese, and oven power cost her more now. She had raised the pizza's price to help pay those costs.
That explained this pizza. It didn't tell them what all prices were doing.
One item can cost more because a sale ends or a shop changes its recipe. One higher price does not prove inflation.
Looking for more clues
Ruby's granddad had noticed higher prices for several groceries and his bus ticket, too.
“Inflation means prices are rising across many goods and services over time,” he said. “To measure it, people check lots of prices.”
A service is work someone does for you, like giving a bus ride. Some prices may fall even while prices rise overall.
“So our shopping trip isn't the whole picture,” Ruby said.
“Right.”
What can $12 buy?
The group still had $12. It just couldn't buy the same pizza.
Purchasing power means how much your money can buy. When prices rise but your money stays the same, it buys less.
They could add $3, buy a smaller pizza, or save pizza day for later. Nobody had to add money they didn't have.
They chose a smaller pizza and shared their apples.
“Did you make my slice smaller?” Ruby asked.
“Everyone's,” Leo said.
Next time, they'd check the price before planning lunch.
Money words
Inflation
Prices rising across many goods and services over time.
Purchasing power
How much your money can buy.
Inflation means prices rise across many things over time. One pricier pizza is not enough to prove it. Rising prices can make the same money buy less.
Your turn
How could the group change lunch plans without asking anyone to spend more?
