Why do living costs differ from state to state? What are the contributing social and economical factors that influence these costs? How do these living costs then influence the salaries?

Answer 1

One of the reasons why living costs may differ from state to state (and place to place) is because of the preference for space. For example, when we think of a half acre of land in downtown Manhattan, this land would be expected to have a higher price than with a half acre of land in rural Alaska. Related to this, we may see that rent -- or the cost of housing -- is greater in urban areas than rural areas because of this pricing of space.

Another point that we may want to think about is the desirability of an area to live. We may not think find the frigid, extreme temperatures of Antarctica desirable for habitation. To compensate for this, we may notice that salaried workers in Antarctica receive higher salaries than those in sunny Florida. To offset discomfort with either a type of job or where the job is located, firms may offer higher wage rates to their workers.