Question

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Answer 1

Total time of travelling is 30 minutes and if we add the shopping time, we find that the time taken in buying from local store is 1 hour. This means the opportunity cost of time is $36. Hence the total cost of buying from local store is $36 + $104 = $140. Total time of travelling across town is 60 minutes and if we add the shopping time, we find that the time taken in buying from a shop across the town is 1.5 hour. This means the opportunity cost of time is $36*1.5 = $54. Hence the total cost of buying from a shop across the town is $54 + $87 = $141 Total time of travelling in neighbouring city is 120 minutes and if we add the shopping time, we find that the time taken in buying is 2.5 hour. This means the opportunity cost of time is $36*2.5 = $90. Hence the total cost of buying from neighbouring city is $90 + $80 = $170. Opportunity cost Price of skirt Total cost 36 Store Local Across town Neighbouring city 54 104 140 87141 80170 90 Cost is minimized when she buys from the Local store.