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

City Price of Grocery Basket
(dollars) Nominal Wage
(dollars) Real Wage
(baskets of groceries)
Boston $187.17 $56,000
Pittsburgh 174.74 50,000
Minneapolis 169.62 55,000
Houston 155.00 45,000

Answer 1

Answer:

Boston = 299.20

Pittsburgh = 286.14

Minneapolis = 324.25

Houston = 290.32

Explanation:

The computation of real wage is shown below:-

Real Wage = Nominal Wage ÷ Price of Grocery Basket

                      Alfonso Nominal and Real Wages

City           Price of grocery      Nominal wage           Real wage

                           basket                                      (Basket of groceries)

Boston               $187.17              $56,000                 299.20

Pittsburgh          $174.74              $50,000                286.14

Minneapolis       $169.62             $55,000                324.25

Houston              $155.00            $45,000                290.32