Tipping the Scales: Analyzing a Change in Incentives
An individual is deciding how to spend their afternoon. They have two choices:
- Work a part-time shift: This pays $60, but they consider the effort involved to be a personal cost equivalent to $20.
- Attend a local street fair: This has no monetary gain, but they value the enjoyment of the experience at $55. Attending the fair requires a $10 entry fee.
What is the minimum bonus amount that would need to be added to the shift's pay to make the individual indifferent between the two options? Explain the steps in your calculation.
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Social Science
Empirical Science
Science
Economy
CORE Econ
Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
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Jamie is deciding between two options for Saturday:
- Go to a music festival: The ticket costs $30, and Jamie values the experience at $80.
- Work a one-time gig: This pays $60, and Jamie considers the effort involved to be a personal cost equivalent to $20.
Jamie reasons, 'If I go to the festival, I'm spending $30 and also giving up the $60 I could have earned. That means the total cost of the festival is $90. Since I only value it at $80, it's a bad deal. I should work instead.'
Which statement best identifies the error in Jamie's calculation of the festival's cost?
Tipping the Scales: Analyzing a Change in Incentives
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