Question

Store Travel Time Each Way (Minutes) Price of a Dress (Dollars per dress)

Local Department Store 15 103
Across Town 30 85
Neighboring City 60 63

Juanita makes $16 an hour at work. She has to take time off work to purchase her dress, so each hour away from work costs her $16 in lost income. Assume that returning to work takes Juanita the same amount of time as getting to a store and that it takes her 30 minutes to shop. As you answer the following questions, ignore the cost of gasoline and depreciation of her car when traveling. Complete the following table by computing the opportunity cost of Juanita's time and the total cost of shopping at each location.

Store Opportunity Cost of Time (Dollars) Price of a Dress (Dollars per dress) Total Cost (Dollars)
Local Department Store 103
Across Town 85
Neighboring City 63

Answer 1

Juanita makes $16 an hour at work so every hour away will cost her $16 in lost wages.

Local store

Opportunity costs would be the lost wages:

= ( Number of hours spent travelling * Wage per hour) + (Number of hours spent shopping * Wage per hour)

= ( 15/60 hours * 16 * 2 for the round trip) + (30/60 mins * 16)

= $16.00

Total cost = Opportunity cost + Price of dress

= 16 + 103

= $119

Across Town

Opportunity cost

= ( 30/60 hours * 16 * 2 for the round trip) + (30/60 mins * 16)

= $24.00

Total cost:

= 24 + 85

= $109

Neighboring city

Opportunity cost:

= ( 60/60 hours * 16 * 2 for the round trip) + (30/60 mins * 16)

= $40.00

Total cost:

= 40 + 63

= $103