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Alfonso wants to know what the cost of living would be in four different cities

Economics Dec 03, 2020

Alfonso wants to know what the cost of living would be in four different cities. He looks at circular ads from each of the cities and finds the prices of goods that he would normally buy during a typical trip to the grocery store each week. He adds up what he would pay for each grocery trip in the different cities and calls the sum “Price of Grocery Basket.” He compares these costs to what he would earn in each city. Compute Alfonso’s real wage in terms of how many baskets of groceries his wage could purchase and complete the “Real Wage” column with this information. Instructions: Enter your answers as a whole number. Real Wage (baskets of groceries) Alfonso's Nominal and Real Wages Price of Grocery City Basket (dollars) Boston $188.09 Pittsburgh 175.38 Minneapolis 170.58 Houston 156.00 Nominal Wage (dollars) $50, 250 50,750 65,250 45,250c

Expert Solution

Alfonso’s real wage ( baskets of groceries) = Nomial Wage (Dollars)/ Price of Grocery Basket (Dollars)

City

Price of Grocery Basket (dollars)

Nominal Wage (dollars)

Real Wage (Basket of groceries)

Boston

$188.09

$50,250

$50,250/ $188.09 = 267 (approx.)

Pittsburgh

$175.38

$50,750

$50,750/ $175.38 = 289 (approx.)

Minneapolis

$170.58

$65,250

$65,250/ $170.58 = 383 (approx.)

Houston

$156.00

$45,250

$45,250/ $156.00 = 290 (approx.)

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