ps001-1

# ps001-1 - was so unpleasant that you would be unwilling to...

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1 Part A.   Should I go cycling today? From experience you can confidently say that a day on the roads is  worth \$120 to you.   The charge for the day is \$40 (which includes bus fare, and renting  of bicycles).   Suppose that if you don't go cycling, you will work at your job as a  salesperson.   The job pays \$60 dollars per day, and you like it just well enough to  have been willing to do it for free.   "Should I go cycling or stay and work as a salesperson?“ C(x) = cost of cycling plus value of forgone earnings = \$40 + \$60  = \$100 Since B(x) = \$120 > C(x), go cycling.

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2 Part B.  Unwilling to do the job for less than \$30/day Suppose instead that your job had been to sweep on  the streets for the same pay, \$60/day, and that the job
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Unformatted text preview: was so unpleasant that you would be unwilling to do it for less than \$30/day. Should you go cycling? There are two equivalent approaches to look at this decision . 3 Comparing the two approaches Approach I Approach II B(X)= 120 30 + B(X)= 120 C(X)= 40 + 60 C(X)= 40 (60 – 30) + B(X) - C(X) = 50 It makes no difference which of these two ways we handle the valuation of the unpleasantness of sweeping the streets. 1. Viewing the unpleasantness as the benefits we can get from going cycling because we can escape from sweeping on the streets. 2. Viewing the unpleasantness of the sweeping job as an offset against its salary....
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ps001-1 - was so unpleasant that you would be unwilling to...

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