Question

Instructor-created question Sahve the following optimal apartment location problem using Suppose you narrowed your apartment list to four Those apartments are in tour locations Location A, Location B Location Cand Location 8 amounts to 7 hours mone of commuting per month than Location A Location Camounts to 7 hours more of commuting per month han Location B and Location D amourts to 7 hours moe of commuting per month than than L C. Using optiization in diferences and Location A as your starting point You shouid rent an apatment in Suppose you curmenbly rant an apartiment in Location C By moving to opfimine, you change your net beneft by$(Enter your response as an iteger)

Answer 1

If the person looks to rent a flat in city B, the extra time required each month for commuting is 7 hours, and the rent reduced by $135. We also know that the value of time is $20/ hour. The person should choose to rent a home in location A only as the cost of 7 hours which = $140 is more than the decrease in rent which is $135 by $5. In the same way it will become more expensive to rent an apartment in location C and location D as the time taken increases the same amount and the rent also decreases by the same amount.

So the person should look to hire an apartment in location A.

If a person used to stay in location C and now has moved to location A in order to optimise, the person will now save 14 hours of time per month in commuting but his rent to be paid in location A will also increase by $270. And the value of time is $20/hour. So the benefit by decreasing the time in commuting is 14*20 = $280. So by moving to location A, the perosn saves $280-$270=$10.

So by moving to location A, the person increases it’s net benefits by $10.