Question

Juanita is deciding whether to buy a suit that she wants, as well as where to buy it. Three stores carry the same suit, but it is more convenient for Juanita to get to some stores than others. For example, she can go to her local store, located 15 minutes away from where she works, and pay a marked-up price of $103 for the suit: 

Store	Travel Time Each Way (Minutes)	Price of a Suit (Dollars per suit)
Local Department Store	15	103
Across Town	30	87
Neighboring City	60	64

Juanita makes $16 an hour at work. She has to take time off work to purchase her suit, so each hour away from work costs her $16 in lost income. Assume that returning to work takes Juanita the same amount of time as getting to a store and that it takes her 30 minutes to shop. As you answer the following questions, ignore the cost of gasoline and depreciation of her car when traveling.

Complete the following table by computing the opportunity cost of Juanita's time and the total cost of shopping at each location

Store	Opportunity Cost of Time (Dollars)	Price of a Suit (Dollars per suit)	Total Cost (Dollars)
Local Department Store		103
Across Town		87
Neighboring City		64

Assume that Juanita takes opportunity costs and the price of the suit into consideration when she shops. 

Answer 1

 Local departmental store: Total traveling time is 30 minutes, and if we add the shopping time, we find that the time taken in buying from the local store is 1 hour. This means the opportunity cost of time is S16. Hence the total cost of buying from local store is $16 + $103 = $119.

 Across town: Total time of traveling across town in 60 minutes, and if we add the shopping time, we find that the time taken in buying from a shop across the city is 1.5 hours. This means the opportunity cost of time is S16*1.5 = S24. Hence the total cost of buying from a shop across the town is $24 + $87 = $111.

 Neighboring city: Total time of traveling in a neighboring city is 120 minutes, and if we add the shopping time, we find that the time taken in buying is 2.5 hours. This means the opportunity cost of time is S16* 2.5 = S40. Hence the total cost of buying from neighboring city is $40 + $64 = $104.

 Since it is cheaper to buy from the city, Juanita will minimize buying from the neighboring town.