Imagine that you are traveling to visit your family in Chica

Imagine that you are traveling to visit your family in Chicago. You can take a train or a plane. The plane ticket costs $300 and it takes 2 hours each way. The train ticket costs $200 and it takes 12 hours each way. Suppose your time is worth $8/hour. Should you take the plane or the bus? Hint: think of opportunity cost

Solution

Cost saving and time saving is calculated below-

Cost saving with train = $300 - $200 = $100

Time saving with plane (round-trip) = 24 – 4 = 20 hours

Person who takes the train can save $100 but it will cost of 20 hours to do. So it is better for person to give the value to time. Hence he should go by plane.