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Suppose Juan has three job offers. He can earn $50,000 in Atlanta, GA; $70,000 in Boston, MA; or $100,000 in San Francisco, CA. If Juan wants to maximize the purchasing power of his income, which offer should he accept?

Respuesta :

Edufirst

Answer:

  • To maximize the purchasing power of his income, Juand should accept the offert of Atlanta, GA.

Explanation:

To answer this question you need the comparative costs of living in each of the trhee cities.

In a similar question, you can find the cost of iiving indexes for Atlanta, Boston, and San Francisco. Here is the table:

                                          Cost of living index

City                                (100 = U.S. City average)

Atlanta, GA                                 98

Boston, MA                               160

San Francisco, CA                   245

Thus, to determine which offer Juan should accept to maximize the purchasing power of his income, divide each income by the cost of living index.

Atlanta, GA:

  • $50,000/98 = $510.20

Boston, MA

  • $70,000/160 = $437.50

San Francisco, CA

  • $100,000/245 = $408.16

Rank the adjusted earnings in decreasing order:

  • $510.20 > $437.50 > $407.16

Hence, in spite of the nominal earnings in Atlanta are the lowest, the higher cost of living indexes of the other cities, make that the offer from Atlanta the best one.

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