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25 February, 00:28

Suppose an airline ticket from Charlotte to Dallas costs $525. A bus ticket is $325. Traveling by plane will take 5 hours, compared with 25 hours by bus. Thus, the plane costs $200 more but saves 20 hours of time (Hint: Note how we are "thinking at the margin" here by looking at the changes). Other things constant, an individual will gain by choosing air travel if, and only if, each hour of her time is valued at more than

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  1. 25 February, 02:40
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    Unitary value of an hour = $10

    Explanation:

    Giving the following information:

    An airline ticket from Charlotte to Dallas costs $525.

    A bus ticket is $325.

    Traveling by plane will take 5 hours.

    Traveling by bus will take 25 hours.

    The plane costs $200 more but saves 20 hours of time

    What is the monetary value of a person to choose a plane over the bus?

    In this exercise, to compensate for the 20 hours, the unitary value of an hour must be at least $10.

    $10hour*20 hours = $200
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