Question Completion:
Store Travel Time Each Way Price of a Suit
(Minutes) (Dollars per suit)
Local Department Store 15 100
Across Town 30 88
Neighboring City 60 63
Juanita makes $16 an hour at work. She has to take time off work to purchase her suit, so each hour away from work costs her $16 in lost income. Assume that returning to work takes Juanita the same amount of time as getting to a store and that it takes her 30 minutes to shop. As you answer the following questions, ignore the cost of gasoline and depreciation of her car when traveling.
Answer:
Juanita and Opportunity Cost:
1. Opportunity cost of Juanita's time and the total cost of shopping at each location:
Store Opportunity Cost Price of a Suit Total Cost
of Time (Dollars) (Dollars per suit) (Dollars)
Local Department Store $16 (1 * $16) $100 $116
Across Town 24 (1.5 * $16) 88 112
Neighboring City 40 (2.5 * $16) 63 103
2. Juanita will minimize the cost of the suit if she buys it from the Neighboring City.
Explanation:
a) Data and Calculations:
Juanita's wages per hour = $16
Total Time Juanita Spent Traveling and Shopping:
Store Travel Time Shopping Total
To and From Time Time
(Minutes) (Minutes) (Hours)
Local Department Store 30 (15*2) 30 1.0 hr (30 + 30)
Across Town 60 (30*2) 30 1.5 hrs (60 + 30)
Neighboring City 120 (60*2) 30 2.5 hrs (120 + 30)
