Aggeliki works for a multinational corporation. They relocate her to a city in w
ID: 1135414 • Letter: A
Question
Aggeliki works for a multinational corporation. They relocate her to a city in which housing and food is double as expensive as in her original city, but all the other goods, like transportation, entertainment, education, etc. are half the price. The company does not know how Aggeliki spends her money. If they want to make sure that Aggeliki is not worse off with the change, what change in salary do they need to give her?
Increase her salary by 50%.
Double her salary.
Triple her salary.
Decrease her salary by 25%.
Aggeliki works for a multinational corporation. They relocate her to a city in which housing and food is double as expensive as in her original city, but all the other goods, like transportation, entertainment, education, etc. are half the price. The company does not know how Aggeliki spends her money. If they want to make sure that Aggeliki is not worse off with the change, what change in salary do they need to give her? increase her salary by 50% Double her salary. O Triple her salary. Decrease her salary by 25%. Decrease her salary by half.Explanation / Answer
Answer: Increase her salary by 50%
Explained using the following example:
Before Aggeliki was relocated:
Housing Cost: $250
Food Cost: $100
Transportation: $200
Entertainment: $50
Education: $300
$900
The total cost before relocation is equal to $900.
The company relocate her to a city where Housing and Food is double as expensive as in her original city, therefore:
Housing Cost: $500
Food Cost: $200
$700
But the transportation, entertainment and eductation costs are half the price, hence:
Tansportation: $100
Entertainment: $25
Education: $150
$275
The total cost after relocation is $700 + $275 = $975
Since the cost has increased after relocation the corparation must increase her salary by 50% so that Aggeliki is not worse off with the change.
Extra Note: IKEA, the furniture and kitchen appliences company uses the MIT Living Wage Calculator to find out the best wages for different city. This calculator helps to find out how much wage is enough to live in that city by taking into consideration the cost of housing, food, transporation and taxes.