Question

A survey question asked a group of people the following question: "Suppose all you care about is your real income. If you could take your 2016 level of income and live in 1980, or remain in 2016, what would you do?" For example, suppose you made $100,000 per year in 2016. If you could have $100,000 in 1980 or 2016. which would you choose? Some of the people responded they would go back to 1980, while others said they would prefer to stay in 2016.

a. The fact that people were split says what about the goods available for consumption in 1980 and 2016?

b. The fact that people were split says what about the preferences of the people

Answer 1

a) The fact that people were split means that most of the goods available were different in 1980 than in 2016. There has been a change in pattern of food consumption. More junk food has been now popular at different outlets which was less in number in 1980. Also the good like computers, mobiles , tablets weren't popular and widely available in 1980s as compared to today's time. People spend a good percentage of money on the electronic gadgets these days . The consumption in 1980s was mostly on food , travel (due to not very widely network of roads) but now with the coming of better technology and effective systems , the airline tickets have been far cheaper and more accessible. The goods these days are more technologically advanced and with doorstep services and better redressal systems , people who preferred goods of 2016 would have got these reasons.

Back in 1980, given this amount of money , the real money value would have been more, so it would have been easier to purchase fixed assets like houses , flats etc.

The real value of $100000 today is less , but with the reduction in costs of several things and widely available substitutes there has been competition and reduction in prices.

b) The people who wanted to be in 1980s might have preferred more of the the fixed assets and investments. But the costs of electricity would also have been high. Also the costs of cars and automobiles would have been high as compared to today. They would have been less efficient , which means more expenditure on gas.

On the other hand , today there is a variety of automobile and larger range to choose from. They have been more efficient. This means that the variety and substitutes have increased which are more cost efficient.

Secondly the real value of the money today would be less because of inflation over the last many years. This means that those who value the real money would want to buy more in the 1980s but lesser cost efficient goods while in 2016 , less could be bought but would be more cost efficient.

(You can comment for doubts)