Suppose you have data from a travel cost methodology survey. The data tell you that, when travel cost is greater than or equal to $20, no trips are taken to a recrea:onal site, and when, travel costs are zero, 100 trips are taken per year to a recreational site.

a) (1 mark) Hand draw a travel cost demand curve clearly based on these data (assume that it is linear). Label completely. b) Calculate consumer's surplus ($) for a typical user whose travel costs are equal to $5.

c) Now suppose that government is thinking about spend money to improve the ameni:es at the recrea:onal site. This would result in a shining upward of the travel cost demand curve. The new demand curve would have the following characteris:cs: linear; when travel cost is greater than or equal to $25, then no trips are taken; and when travel costs are zero, 125 trips are taken per year to the recrea:onal site. Add this new demand curve hand drawn to your diagram in a

d) Now, calculate the gain in consumer's surplus from the improvements at the recrea:onal site for the typical user. Assume, that this user will not change the number of trips taken as a result of the improvements.

e) Recalculate the gain in consumer's surplus for the typical user but now assume that they increase the number of trips taken (note, this user is still only paying $5 in travel costs).

f) Explain how a government could use the informa:on about the gain in consumer's surplus in its future planning over possible improvements to recrea:on in the region.

Answer rating: 100% (QA)

a The travel cost demand curve is a linear relationship between the number of trips taken to a recreational site and the travel cost The demand curve ... View the full answer