1. A Travel-Cost Method Now it is time for your first consulting job as an environmental economist. The Forest Service would like to know whether they should preserve some national forest land, previously slated to be logged, for hiking. You are helping do a travel-cost analysis to estimate the annual benefits of hiking in this area. Survey data has been gathered from 500 hikers who visited the forest last year. This forest did not charge an entrance fee. Using a statistical technique called regression analysis, you have controlled for differences in income, employment status, age, and other important factors that might affect the number of hiking trips taken. Taking these factors into account, you have developed the following relationship: Zone Population in Cost Per Hiking Hiking Trips zone Trip Per Person Taken Per Zonal Person Per Year 1 1,000 2 3,000 3 2,000 20 8 40 6 80 2 where cost includes gas, tolls, fares, hotels, and the value of time spent traveling. a. Graph a linear demand curve for hiking trips per person as a function of the "price" - the travel cost. Be sure that this demand curve extends to the axes. b. Based on demographic information about the people living in the vicinity of the proposed park, estimate the total visits to the park when the fee - $0, the fee = $40 and the fee $80. Graph the relationship between fees charged and total visits to the park. c. What is the estimated net economic surplus associated with the hiking experience in the park. To determine this you will have to calculate the area under the total visits curve graphed in part 2b.
1. A Travel-Cost Method Now it is time for your first consulting job as an environmental economist. The Forest Service would like to know whether they should preserve some national forest land, previously slated to be logged, for hiking. You are helping do a travel-cost analysis to estimate the annual benefits of hiking in this area. Survey data has been gathered from 500 hikers who visited the forest last year. This forest did not charge an entrance fee. Using a statistical technique called regression analysis, you have controlled for differences in income, employment status, age, and other important factors that might affect the number of hiking trips taken. Taking these factors into account, you have developed the following relationship: Zone Population in Cost Per Hiking Hiking Trips zone Trip Per Person Taken Per Zonal Person Per Year 1 1,000 2 3,000 3 2,000 20 8 40 6 80 2 where cost includes gas, tolls, fares, hotels, and the value of time spent traveling. a. Graph a linear demand curve for hiking trips per person as a function of the "price" - the travel cost. Be sure that this demand curve extends to the axes. b. Based on demographic information about the people living in the vicinity of the proposed park, estimate the total visits to the park when the fee - $0, the fee = $40 and the fee $80. Graph the relationship between fees charged and total visits to the park. c. What is the estimated net economic surplus associated with the hiking experience in the park. To determine this you will have to calculate the area under the total visits curve graphed in part 2b.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1. A Travel-Cost Method
Now it is time for your first consulting job as an environmental economist. The Forest
Service would like to know whether they should preserve some national forest land,
previously slated to be logged, for hiking. You are helping do a travel-cost analysis to
estimate the annual benefits of hiking in this area.
Survey data has been gathered from 500 hikers who visited the forest last year. This forest
did not charge an entrance fee. Using a statistical technique called regression analysis, you
have controlled for differences in income, employment status, age, and other important
factors that might affect the number of hiking trips taken. Taking these factors into
account, you have developed the following relationship:
Zone
Population in
Cost Per Hiking
Hiking Trips
zone
Trip Per Person
Taken Per Zonal
Person Per Year
1
1,000
2
3,000
3
2,000
20
8
40
6
80
2
where cost includes gas, tolls, fares, hotels, and the value of time spent traveling.
a. Graph a linear demand curve for hiking trips per person as a function of the "price" -
the travel cost. Be sure that this demand curve extends to the axes.
b. Based on demographic information about the people living in the vicinity of the
proposed park, estimate the total visits to the park when the fee - $0, the fee = $40 and
the fee $80. Graph the relationship between fees charged and total visits to the
park.
c. What is the estimated net economic surplus associated with the hiking experience in
the park. To determine this you will have to calculate the area under the total visits
curve graphed in part 2b.
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