Question

Jose is offered a job in Riverside where the CPI is 80, and a job in Los Angeles, where things are a little more expensive and so the CPI is 200. Jose's job offer in Los Angeles is for $100,000. How much does the Riverside job have to pay in order for the two salaries to represent about the same purchasing power (Hint: use the CPIs given to convert Los Angeles dollars to Riverside dollars)

Answer 1

Answer:

$40,000

Explanation:

in real dollars, the job in Los Angeles pays $100,000 / 2.00 = $50,000

Since the CPI at Riverside is 80 (or 0.8), we need to solve the following equation:

$50,000 = X / 0.8     where X is the equivalent salary in Riverside

X = $50,000 x 0.8 = $40,000

this means that a $40,000 salary in Riverside is equivalent to a $100,000 salary in Los Angeles