Is the household in locational equilibrium

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Suppose that a household resides in an urban area at a distance to the downtown of 8 miles. The household occupies 3,000 square feet of land and at this distance, land rent is $1.50 per year per square foot. Land rent declines by $.05 per square foot as distance to downtown increases by one mile. A member of the household must travel downtown to work five days per week for 50 weeks per year. The cost of this trip is $4.00 per day, which includes both money cost and time cost converted to money-so the marginal cost per round trip mile is $.50.

A. Is the household in locational equilibrium? How did you determine your answer? Specifically, what equation did you use?

B. If the household is not in locational equilibrium, which direction should it move to increase its well-being?

C. What would the slope of the land rent function need to be for the household to be in locational equilibrium?

Reference no: EM133078426

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