Now it is time for your first consulting job as an environmental economist. The Forest Service would like to know whether they should set aside some national forest land, previously slated to be logged, for hiking. You are helping to do a travel-cost analysis to estimate the benefits of setting aside the land.
Survey data have been gathered from 500 hikers who visited a forest in a neighboring state. Using a statistical techniques called regression analysis, you have controlled for differences of income, employment status, age, and other important factors that might affect the number of hiking trips taken. Taking these factors into account, you have developed the following relationship:
Cost to Get to # of Hiking Trips
Hiking Areas Per Person Per Year
$20 8
$40 6
$80 2
A) Assume that the demand for hiking trips can be represented by a straight line. On the basis of the above table, graph the demand curve for hiking trips per person as a function of the price, i.e., the travel cost.
B) Based on the demographic information about the people living in the vicinity of the proposed park, you have estimated that 50,000 people will take an average of four hiking trips per year. Calculate:
(i) The consumer surplus (access value) for an average visitor.
(ii) The total consumer surplus per year from the proposed park.
(iii) How much would the average visitor be willing to pay in a one-time fee without affecting their average number of visits of four trips per year.
Note: you may answer part (B) either graphically or numerically.