Hoverboards and the Factory Market Area

UsingFigure 3-3as a starting point, consider the effect of introducing hoverboards.

1. Suppose hoverboards decrease travel time for consumers from 1/10 per round-trip mile to 1/20 per round-trip mile. Illustrate the implications for the radius of the market area of the factory, including a value for the new radius.
2. Suppose hoverboards also decrease the commuting cost of factory workers, decreasing the cost of urban living from 0.80 gallons to 0.30 gallons. Illustrate the effect on radius of the market area of the factory, including a value for the new radius.

FIGURE 3-3 Net Price and Market Area of Factory Milk (gallons) 1205 Cost: homemade shoes 1.00 Net price: factory shoes 0.40 b -H- - - 0.30 a 1 0 Distance from factory