Question

Texas charges 8.5 percent for sales tax. Minnesota doesn’t charge sales tax on clothing. A resident of Texas is going on a trip to Minneapolis next week and is considering buying some new clothes. However, the traveller will need an extra suitcase to bring the clothing home and the airline charges an extra $25 to check another suitcase on the plane. The traveller has a $300 budget for new clothes. Should she buy the clothes in Texas or Minnesota? Use the smart decision model we learned in class. Justify your answer mathematically and include an emotional evaluation.

Answer 1

6%......................................

Answer 2

Answer:  Buy in Texas

Explanation:  Let X be the amount that can spent on clothes in Texas.  The total cost would be:

Total = X + (0.085X)  [The cost of the clostes plus 8.5% sales tax]

$300 = X*(1.085)

X = $276.50 on the clothes

For Minnesota, the total that can be spent on clothes is $300 - 2*(25) = $250 on the clothes.  [$50 is for the extra suitcase, 2*$25 for both ways].

The extra cost of a second suitcase is higher than the sales tax in MN, so Texas is less expensive, in spite of the sales tax.  

Emotionally, it is a hard decision.  MN would seem to offer a more cosmopoliton range of choices than Texas, and that is exciting.  But only a few in Texas wear cosmopoliton, prefering durable, cowboy, big-buckle fashion.  So while not as exciting, your friends won't tease you about your MN style choices.