A basket of groceries rises in price from 30 to 40 while a shopper's salary stays the same. By how much has purchasing power fallen?

1. Purchasing power depends on inflation and income together, and here income has not moved. 2. The same 30 that once bought the whole basket now buys 30 worth of a basket priced at 40. 3. That is 30 divided by 40, so the shopper can buy only 75 percent as many groceries as before. 4. The shortfall is the missing 10 out of the new price of 40. 5. Ten divided by forty is 25 percent, so purchasing power has declined by 25 percent. 6. Reading the fall as 10 percent mistakes the money amount of the rise for a percentage. 7. Dividing the rise of 10 by the old price of 30 gives 33 percent, which measures the price increase rather than the loss of purchasing power. _Source: OpenStax Introduction to Business (CC BY 4.0), Ch 1 "Understanding Economic Systems and Business", section 1.4 Macroeconomics: The Big Picture_