Sample Solution

Option 1: To calculate the new annual salary with a 2.5% increase, one must first find the median annual salary for the college graduate. Assuming this to be $30,000, then to calculate the new annual salary using Option 1 multiply by .025 and add it to the original amount:
Original Salary + (Original Salary x .025) = New Salary
$30,000 + ($30,000 X .025) = 30,750
This means that with Option 1 of a 2.5% increase in median salary annually, their new yearly salary would be $30,750.

Option 2: To calculate the new annual salary with an additional $1500 added on top of their existing median income as a college graduate they simply need to add together both amounts:
Original Salary + Additional Amount = New Salary
$30,000 + 1500 = 31,500

Therefore with Option 2 of adding an additional $1,500 annually instead of a percentage change in income their resulting yearly salary would be $31.500.

The option which should be chosen as a college graduate depends primarily on personal preference because both options result in different absolute changes and relative changes. An absolute change is defined as “the difference between two values” (Khan Academy 2019). In terms of Option 1 there was an absolute change from $30k/year to $7k/year or an increase of approximately 0.2%. A relative change is when “you compare how much one value has changed relative to another value” (Khan Academy 2019). For example if we look at Option 2 there was an absolute change from $30k/year to 31.5k/year representing a 5% relative increase in wages.

If you are looking for immediate growth then choosing option two may present advantages due to its larger relative wage increase; however if you are looking for more steady long-term growth then Option 1 may suit your needs better due its smaller but consistent rate of wage increases over time.