How does MaxiFi derive the adult equivalents for various combinations of adults and children?
Given our defaults that 2 can live as cheaply as 1.6 and that it costs 70% of an adult standard of living to give a child an equivalent living standard, then the economy of joint living, x, is such that 2^x = 1.6, i.e., x = log 1.6 / log 2 = 0.6781.
The general formula is the (number of adults + number of children * 0.7)^0.6781
So, the adult equivalent of two adults and one child is (2 + 0.7)^0.6781 = 1.961,
of two adults and two children is (2 + 1.4)^0.6781 = 2.293, and
of two adults and three children is (2 + 2.1)^0.6781 = 2.603.
of one adult and one child is (1 + 0.7)^0.6781 = 1.433,
of one adult and two children is (1 + 1.4)^0.6781 = 1.811, and
of one adult and three children is (1 + 2.1)^0.6781 = 2.154.
You can change the defaults, but unless you have very compelling economic rationale, we suggest that you use our well researched and considered defaults.
A factor of 2 means no sharing of resources (no economy of scale) and a factor of 1.6 means more sharing or increased economy of scale.
When two people are the same age (and no children to keep the calculation simple), when the "live as cheaply as" factor is changed we would see the following: The discretionary spending will stay the same, but the amount of per-adult living standard go up when there is more sharing (e.g. 1.6) and down when there is less sharing or no sharing (e.g. 2) with the household amount (discretionary spending) staying the same.
But when two people are not the same age, the cost to keep the survivor's per-adult living standard as it was with both alive is funded from lifetime household discretionary spending and thus the discretionary spending can go down when per-adult spending has gone up because of more sharing.