4. Do you think that incomes and purchasing power are related? Are companies required to pay their employees more to compensate for higher costs of living? How to read this chart (from NY Times):To better understand, imagine a store offering a range of goods andservices, each for sale at the national-average price for that particularitem. Now, imagine a shopping cart filled with $100 worth of itemsfrom that store. In Hawaii, $100 buys about 85 percent of the goods inthe cart thanks to the high prices there. In other words, $100 in Hawaiifeels more like $85.60, compared to the national average. InMississippi, the opposite is true. With $100, you would be able to buythe cart's contents and more: the equivalent of $115.30 of goods andservices from the national-average store.What data is used in this analysis (from NY Times)?The Regional Price Parities are calculated using data alreadycollected for another indicator, the Consumer Price Index, whichserves as a measure of inflation. For that index, the governmenttracks prices of more than 200 goods and services, including men'ssuits, college textbooks, cereal, electricity and cars and trucks. It alsotallies rents, which are particularly variable among states. The "realvalue" of $100 in rent can range from roughly $63 in Hawaii to $160 inArkansas.

Answer: Purchasing power: purchasing power refers to the number of goods and services that can be…

Answered: Do you think that incomes and…

Do you think that incomes and purchasing power are related? Are companies required to pay their employees more to compensate for higher costs of living?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

4. Do you think that incomes and purchasing power are related? Are companies required to pay their employees more to compensate for higher costs of living?

How to read this chart (from NY Times):
To better understand, imagine a store offering a range of goods and
services, each for sale at the national-average price for that particular
item. Now, imagine a shopping cart filled with $100 worth of items
from that store. In Hawaii, $100 buys about 85 percent of the goods in
the cart thanks to the high prices there. In other words, $100 in Hawaii
feels more like $85.60, compared to the national average. In
Mississippi, the opposite is true. With $100, you would be able to buy
the cart's contents and more: the equivalent of $115.30 of goods and
services from the national-average store.
What data is used in this analysis (from NY Times)?
The Regional Price Parities are calculated using data already
collected for another indicator, the Consumer Price Index, which
serves as a measure of inflation. For that index, the government
tracks prices of more than 200 goods and services, including men's
suits, college textbooks, cereal, electricity and cars and trucks. It also
tallies rents, which are particularly variable among states. The "real
value" of $100 in rent can range from roughly $63 in Hawaii to $160 in
Arkansas.

Definition Definition Value of one unit of currency in terms of goods and services. Purchasing power refers to the ability of money to purchase goods and services at a particular point of time. As price levels in the economy increase, the purchasing power of one unit of currency decreases and vice versa.

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