Question
Suppose Doug will live and work forever and the interest rate i is 10 percent. How can we get Doug to migrate? We will build
Suppose Doug will live and work forever and the interest rate i is 10 percent. How can we get Doug to migrate? We will build this throughout the question.
1a. First, set the NP V to 0 and find the w that leaves Norma indifferent between moving and not moving. What is this called?
1b. Next, let's assume that the moving cost c increases with the distance d. We will define a specific equation - c = d + 1000. Use this equation to express your answer from (1a) as a function of distance d.
1c. If Doug had to move 400 miles, what is the wage gain Doug would need?
1d. Doug got a job offer from an employer about 11 hours away, which would be a drive of about 1000 miles. This new job offers him $250 a year more than he makes on his current job. Would Doug move?
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