Juanita is deciding whether to buy a dress that she wants, as well as where to b
ID: 1148819 • Letter: J
Question
Juanita is deciding whether to buy a dress that she wants, as well as where to buy it. Three stores carry the same dress, but it is more convenient for Juanita to get to some stores than others. For example, she can go to her local store, located 15 minutes away from where she works, and pay a marked-up price of $103 for the dress: Discounted price Marked-up price Juanita's office Original price Store Local Department Store Across Town Neighboring City (Minutes) 15 30 60 (Dollars per dress) 1003 85 63Explanation / Answer
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 $16. Hence the total cost of buying from local store is $16 + $103 = $119.
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 $16*1.5 = $24. Hence the total cost of buying from a shop across the town is $24 + $85 = $109.
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 $16*2.5 = $40. Hence the total cost of buying from neighbouring city is $40 + $63 = $103
Cost is minimized when the purchase is made from neighbouring city.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.