1. Cliff Arthur has equally attractive job offers in Miami and Los Angeles. The rent ratios in the cities are 8 and 20, respectively. Cliff would really like to buy rather than rent a home after he moves. Explain how to interpret the rent ration and what it tells Cliff about the relative attractiveness of moving to Miami rather than Los Angeles, given his stated goal
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"his stated goal" = ???
I'd go for the 8! The cost of living has to count for something.
If he were to spend, say, 30% of his net income on housing, especially in an area in a state with a high cost of living, what will he do without?
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To interpret the rent ratio, we compare the cost of renting a home in one city relative to another. In this case, the rent ratios for Miami and Los Angeles are 8 and 20, respectively.
The rent ratio tells us how many times more expensive it is to rent a home in one city compared to the other. In this case, the rent in Los Angeles is 20 times more expensive than in Miami.
If Cliff's goal is to buy a home after he moves, he can use the rent ratio to assess the relative attractiveness of moving to Miami versus Los Angeles. A lower rent ratio suggests that buying a home might be more affordable in that city, while a higher rent ratio indicates that buying a home might be more expensive.
Given the rent ratios of 8 and 20 for Miami and Los Angeles, respectively, Cliff can infer that it might be more financially advantageous to move to Miami if his goal is to buy a home. Renting a home in Miami is significantly cheaper compared to Los Angeles, suggesting that the cost of buying a home in Miami might also be more affordable. However, other factors, such as job opportunities, cost of living, and personal preferences, should also be considered before making a final decision.