Question

Let a doctor earns $20 per hour, a plumber $ 5 per hour, and a professor...

Let a doctor earns $20 per hour, a plumber $ 5 per hour, and a professor $ 10 per hour. Everything else is the same, which one will devote more hours to negotiating the price of a new car? Explain

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Answer #1

The doctor is earning $20 per hour, a professor $10 per hour and a plumber is earning $5 per hour. If each of them choose to buy a new car then a plumber will spend more time for negotiating the price of the new car.

The opportunity cost for a doctor is $20/hour and $10/hour for a professor. However, the opportunity cost for a plumber is far lower at $5/hour if compared against others. He is not going to lose much money if he spends hours in negotiation as his marginal rate of income is lower and he might benefit if the gains from the negotiated price is higher than his opportunity cost.

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