Bruce and Eve currently live in Tulsa. Bruce currently earns $30,000 per year while Eve earns $40,000 per year. Bruce has family in Tulsa, so he has a higher moving cost ($25,000) than Eve ($10,000). Let’s assume that each person lives for 4 periods and have the same discount rate (0.1). (a) Calculate Bruce and Eve’s present value of earnings if they both stay in Tulsa. (b) Recently, Bruce received a job offer in Denver earning $40,000 while Eve got a job offer for $50,000. (1) Would Bruce move if he were single? Explain your reasoning. (2) Would Eve move if she were single? Explain your reasoning. (3) Will they move as a married couple? Explain your reasoning. (c) Suppose that Bruce and Eve only live for two periods now. Re-do part b. Explain why youranswers changed.
Bruce and Eve currently live in Tulsa. Bruce currently earns $30,000 per year while Eve earns $40,000 per year. Bruce has family in Tulsa, so he has a higher moving cost ($25,000) than Eve ($10,000). Let’s assume that each person lives for 4 periods and have the same discount rate (0.1).
(a) Calculate Bruce and Eve’s present value of earnings if they both stay in Tulsa.
(b) Recently, Bruce received a job offer in Denver earning $40,000 while Eve got a job offer for $50,000.
(1) Would Bruce move if he were single? Explain your reasoning.
(2) Would Eve move if she were single? Explain your reasoning.
(3) Will they move as a married couple? Explain your reasoning.
(c) Suppose that Bruce and Eve only live for two periods now. Re-do part b. Explain why youranswers changed.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
