Opportunity Cost Economics Problem
Patty is deciding whether to buy a suit that she wants, as well as where to buy it. Three shops carry the same suit. She can go to her local department store, located 15 minutes away from where she works, and pay $120 for the suit. She can travel to a shop across town, located 30 minutes away from where she works, and pay $90 for the suit. Finally, she can take a one-hour drive out of town to a neighboring city and pay $85 for the suit.
Patty makes $90 an hour at work. She has to take time off work to purchase her suit, so each hour away from work costs her $90 in lost income. Assume that returning to work takes Patty the same amount of time as getting to a shop and that it takes her 30 minutes to shop at the store.
If Patty chooses to purchase the suit in the shop across town, the opportunity cost of her time spent purchasing the suit will be:
I know that opportunity cost is the value of the best activity sacrificed in making a choice. However, I am not sure how to find the opportunity cost of her time spent when purchasing the suit. Would it be $90 because she is traveling a total of 1 hour for the suit and each hour away from work she loses $90?
Re: Opportunity Cost Economics Problem
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Three shops carry the same suit. She can go to her local department store, located 15 minutes away from where she works, and pay $120 for the suit.
So she has to drive 15 minutes, shop 30 minutes and drive 15 minutes back for a total of 1 hour. So it will cost her $90 in wages and $120 for the suit, a total of $210.
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She can travel to a shop across town, located 30 minutes away from where she works, and pay $90 for the suit.
So half an hour to the store, half an hour shopping and half an hour back for one and half hours time. At $90 per hour that cost is 90+ 45= $125. The $90 for the suit brings it to a total of $215.
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Finally, she can take a one-hour drive out of town to a neighboring city and pay $85 for the suit.
One hour driving to the store, half an hour shopping, one hour driving back- two and a half hours which will cost 180+ 45= $225. Adding the $85 for the suit, it cost her $310.
