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Math Help - Microeconomics question

  1. #1
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    Microeconomics question

    Hi there,

    I want to know how I would set up this problem. I've been thrown into a Microeconomics class and it's been years since I've had any experience with opportunity cost equations. Could I possibly get some help with how to work this?

    Suppose there are two ways of traveling from Boston to DC. The Megabus costs $25 each way and takes 4 and 1/2 hours. The Amtrak costs $100 and takes three hours. Different travelers may value their time differently (for instance, one traveler may value his time at $100 per hour, and another at $20 per hour). What time valuation (per hour) would make a traveler indifferent to the two bus options?
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  2. #2
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    Re: Microeconomics question

    suppose my opportunity cost of time wasted is $x per hour.

    The cost of the megabus ticket is:
    Direct cost: 25
    Opportunity cost: 4.5x
    Total cost: 25 + 4.5x

    do the same thing for the other ticket, then find the value of x that makes the total cost of both options equal.

    PS: i assume he is travelling one way. although if you work it through im pretty sure that wont affect the final answer.
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  3. #3
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    Re: Microeconomics question

    Quote Originally Posted by SpringFan25 View Post
    suppose my opportunity cost of time wasted is $x per hour.

    The cost of the megabus ticket is:
    Direct cost: 25
    Opportunity cost: 4.5x
    Total cost: 25 + 4.5x

    do the same thing for the other ticket, then find the value of x that makes the total cost of both options equal.

    PS: i assume he is travelling one way. although if you work it through im pretty sure that wont affect the final answer.
    Yay! Thank you! I never would have thought of that. So I just set 25 + 4.5x equal to 100 + 3x to get x = 50?
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