Q2. Imagine an individual facing a pivotal decision regarding their career and living situation, with an annual discount rate of 15%. They are contemplating whether to stay in their current location of California or relocate to Texas. This decision must be made with three working periods remaining in their professional life. By choosing to stay in California, they are projected to earn $20,000 in first period, $25,000 in second period and $30,000 in third period. On the other hand, moving to Texas promises a higher annual income of $10,000 in period 1, $25,000 in period 2 and $50,000 in period 3. (a) What is the maximum cost of relocation that the individual can justify to make the move fi- nancially viable? (b) If discount rate changes to 20%, what would be the maximum cost of relocation that the indi- vidual can justify to make the move from California to Texas? (c) Based on your findings in part (a) and part (b) what is your conclusion?

Q2. Imagine an individual facing a pivotal decision regarding their career and living situation, with an annual discount rate of 15%. They are contemplating whether to stay in their current location of California or relocate to Texas. This decision must be made with three working periods remaining in their professional life. By choosing to stay in California, they are projected to earn $20,000 in first period, $25,000 in second period and $30,000 in third period. On the other hand, moving to Texas promises a higher annual income of $10,000 in period 1, $25,000 in period 2 and $50,000 in period 3. (a) What is the maximum cost of relocation that the individual can justify to make the move fi- nancially viable? (b) If discount rate changes to 20%, what would be the maximum cost of relocation that the indi- vidual can justify to make the move from California to Texas? (c) Based on your findings in part (a) and part (b) what is your conclusion?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.3P

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