Question 3 The figure shows the housing price (rent) per square foot of houses located at different distances to the employment area (city centre), with and without the consumer substitution effect. Taking point j in the figure as an example, assuming that the household's monthly maximum budget is $800, if the household is living at a distance 10 km to the employment area, the unit commuting cost is $50 per km per month, and the unit price of housing per square foot per month is $0.30. In other words, the household living at point j can afford to live in a 1,000 square feet house, by paying a monthly rent of $300 ($0.30 x 1,000 sf) and a monthly commuting cost of $500 ($50 x 10 km). 3(a) Calculate the maximum house size the household can afford to live at a distance of 5 km to the employment area (point f in the figure).

Question 3 The figure shows the housing price (rent) per square foot of houses located at different distances to the employment area (city centre), with and without the consumer substitution effect. Taking point j in the figure as an example, assuming that the household's monthly maximum budget is $800, if the household is living at a distance 10 km to the employment area, the unit commuting cost is $50 per km per month, and the unit price of housing per square foot per month is $0.30. In other words, the household living at point j can afford to live in a 1,000 square feet house, by paying a monthly rent of $300 ($0.30 x 1,000 sf) and a monthly commuting cost of $500 ($50 x 10 km). 3(a) Calculate the maximum house size the household can afford to live at a distance of 5 km to the employment area (point f in the figure).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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