Question

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 theses 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: Round your answers to whole numbers. Alfonso’s Nominal and Real Wages CityPrice of NominalNominalReal Wage Grocery Basket ($)Wage ($)(baskets of groceries) Boston$187.17$56,000 Pittsburgh174.7450,000 Minneapolis169.6255,000 Houston155.0045,000

Answer 1

Step-by-step explanation:

The formula to compute the real wage is shown below:

Real wage = (Nominal Wage) ÷ (Grocery Basket price)

For Boston:

= $56,000 ÷ $187.17

= $299

For Pittsburgh:

= $50,000 ÷ 174.74

= $286

For Minneapolis:

= $55,000 ÷ 169.62

= $324

For Houston:

= $45,000 ÷ 155.00

= $290

For computing the real wage rate we simply divide the nominal wage by the price of grocery basket