Question

(20)    All families in Stalinville earn the same income of $5000 per month. Also each family has one worker who works outside the home. Other than commuting distance to the one business district downtown and the size of houses, all residential locations are identical.

The train to downtown costs $300 per mile per month. All houses at five miles from the city center are 1,000 square feet and rent for $1,200.

Using the appropriate graph, explain how the price of housing (Ph per square foot) is determined. What will the price of housing be at 3 miles (yes, you will have to make these numbers up – in keeping with the example)?

Answer 1

Here, the cost for the train to downtown is $300 per mile per month.

Then, the expenditure to travel 5 miles in train is = $(5*300) = $1500 per month.

Now, the total expenditure is = $(1500+1200) = $2700

Let x miles be the distance of house from the city centre.

Then, the rent of the house for each month is = $(2700-300*x).

Now, when x = 3 miles, then the rent of the house for each month is = $(2700-300*3) = $1800

And, the price of housing (per square foot) is = $(1800/1000) = $1.8

When, x = 5 miles, then the price of housing (per square foot) is = $(1200/1000) = $1.2