Recall the locational indifference condition in the model of housing prices with com- muting costs: AP h(x)+Axt=0 A) If h(x)=750, have we modeled consumers as being able to substitute? How do you know? B) Derive the slope of the bid-rent curve when h(x) = 750 D) Rederive the slope of the bid-rent curve using h(x) = 650+x² E) Find the distance at which the two bid rent curves from part B and D have equal slope. (hint: set h() from part B equal to part D and solve).

Recall the locational indifference condition in the model of housing prices with com- muting costs: AP h(x)+Axt=0 A) If h(x)=750, have we modeled consumers as being able to substitute? How do you know? B) Derive the slope of the bid-rent curve when h(x) = 750 D) Rederive the slope of the bid-rent curve using h(x) = 650+x² E) Find the distance at which the two bid rent curves from part B and D have equal slope. (hint: set h() from part B equal to part D and solve).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Recall the locational indifference condition in the model of housing prices with com-
muting costs:
AP · h(x) + Ax t = 0
A) If h(x) = 750, have we modeled consumers as being able to substitute? How do you know?
B) Derive the slope of the bid-rent curve when h(x)
= 750
D) Rederive the slope of the bid-rent curve using h(x)
= 650 + x2
E) Find the distance x at which the two bid rent curves from part B and D have equal slope.
(hint: set h(:) from part B equal to part D and solve).

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Step 1: Define commuting costs

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Step 3: Derive the slope of the bid-rent curve

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Step 4: Redrive the slope of the bid rent curve

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Step 5: Find the distance x at which the two bind rent curve

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Recall the locational indifference condition in the model of housing prices with com- muting costs: AP · h(x) + Ax t = 0 A) If h(x) = 750, have we modeled consumers as being able to substitute? How do you know? B) Derive the slope of the bid-rent curve when h(x) = 750 D) Rederive the slope of the bid-rent curve using h(x) = 650 + x2 E) Find the distance x at which the two bid rent curves from part B and D have equal slope. (hint: set h(:) from part B equal to part D and solve).