The city of Metropolita added a new subway station in a neighborhood between two existing stations. After the station was built, the average house price increased by $10,000 and the average commute time fell by 15 minutes per day. Suppose that there is one commuter per household, that the average commuter works 5 days a week, 50 weeks a year, and that the benefits of reduced commuting time apply to current and future residents forever. Assume an interest rate of 5%. minutes per year of difference in commute time leaving time for more work time and, thus, earning Each household represents additional income. if V is the value of a minute, then V*3750 is the annual value per household of the extra work. The present discounted value of that extra work time (V*3750) in perpetuity (forever) is V*3750/ The increase in the average house price indicates that $10,000 is the total value of that time. Setting the present discounted value equal to 10,000 and solving for V gives a value per minute of or a value per hour of

The city of Metropolita added a new subway station in a neighborhood between two existing stations. After the station was built, the average house price increased by $10,000 and the average commute time fell by 15 minutes per day. Suppose that there is one commuter per household, that the average commuter works 5 days a week, 50 weeks a year, and that the benefits of reduced commuting time apply to current and future residents forever. Assume an interest rate of 5%. minutes per year of difference in commute time leaving time for more work time and, thus, earning Each household represents additional income. if V is the value of a minute, then V3750 is the annual value per household of the extra work. The present discounted value of that extra work time (V3750) in perpetuity (forever) is V*3750/ The increase in the average house price indicates that $10,000 is the total value of that time. Setting the present discounted value equal to 10,000 and solving for V gives a value per minute of or a value per hour of

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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