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Suppose one were asked to recommend a price for the output of a proposed downtown parking garage, so that the project would have as large a Net Present Value as possible. In this case, the optimal parking price or rate is the one for which the last person's willingness to pay for parking will exactly equal that person's marginal cost of parking, including the opportunity cost of that person's time.
Required:
Describe Willingness to Pay?
The basic concepts of price theory
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1. Define the concept of opportunity cost in your own words. Given an example from your own life of the opportunity cost of a decision (do NOT use classroom examples). Explain why
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