Suppose that the income elasticity of demand for land is


Suppose that the income elasticity of demand for land is +0.75. The unit commuting cost (cost per mile) is the sum of monetary cost (30 cents per mile) and time cost (opportunity cost). Suppose that the typical commuter earns a wage of $12 and takes 30 minutes to commute 10 miles to work. Every worker values commuting time at half of his or her wage. Can the observed pattern of income segregation be explained by the trade-offs between commuting cost and land cost? If there is not enough information to answer the question, what additional information do you need, and how would you use it?

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Macroeconomics: Suppose that the income elasticity of demand for land is
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