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Gobbet11_Solution_Problem_Set

Gobbet11_Solution_Problem_Set - Gobbet#11 Travel Cost...

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Gobbet #11 – Travel Cost Method Assume that 1,000 people live in three concentric rings, areas A, B, and C, surrounding a national forest. All these people are identical in terms of their income and preferences. People in area C live furthest from the forest, and face travel costs of $50 to use the resource for a day; they take only one trip per year. Folks in area B must pay $25 to visit the forest; they take 6 trips per year. Finally, area A people can wander in for free, and they do so 15 times per year. Using this information, graph the demand curve that plots the relation between travel costs and visits. In addition, determine the total consumer surplus for people living in areas A, B, and C. Solution: Plot a demand curve derived from the travel cost data: first draw your axes, with number of trips per year per person on the x-axis, and travel cost per year on the y-axis. From there, simply plot the information you were given. Folks in area C will take 1 trip per person per year at a travel cost of $50 per trip. Folks in area B will take 6 trips per person per year at a travel cost of $25 per trip.
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