Last year your job at the university cafeteria paid you $9 an hour and the price of a music download was $1.00.This year your cafeteria job pays $9.90 per hour and download costs $1.10.You are clearly
A)worse off because of inflation.
B)worse off because the download is now relatively more expensive.
C)better off because your wage rate went up.
D)better off because the download now costs less work.

Question

Quizplus · Accepted Answer

The increase in wage rate from $9 to $9.90 per hour is a 10% increase, while the increase in the cost of a music download from $1.00 to $1.10 is also a 10% increase. However, when comparing the amount of work needed to afford a music download, last year it required 1/9 of an hour (about 6.67 minutes), and this year it requires 1/9 of an hour (about 6.67 minutes) as well, indicating that the relative cost in terms of labor has not changed. However, since the wage has increased in absolute terms, you are better off in terms of purchasing power, making D the correct answer.

Last Year Your Job at the University Cafeteria Paid You