1. Managerial Economics-Charles W. Upton The Value of Time t x X +t y Y +T w = T

2. The Value of Time 2 Almost all economic purchases require time to use. This is a cost of the good.

3. The Value of Time 3 Almost all economic purchases require time to use. This is a cost of the good. Add the time cost, valued at the consumer’s wage rate, to the cost of the product; and

4. The Value of Time 4 Almost all economic purchases require time to use. This is a cost of the good. Add the time cost, valued at the consumer’s wage rate, to the cost of the product; and Add the value of time, again valued at the wage rate, to the budget constraint.

5. The Value of Time 5 Hiring A Mowing Service

6. The Value of Time 6 Hiring A Mowing Service

7. The Value of Time 7 Hiring A Mowing Service

8. The Value of Time 8 Hiring A Mowing Service 20 hours at the value of their time

9. The Value of Time 9 Hiring A Mowing Service

10. The Value of Time 10 The Formal Model Each unit of X takes t x hours; Each unit of Y takes t y hours.

11. The Value of Time 11 The Formal Model Each unit of X takes t x hours; Each unit of Y takes t y hours. The consumer spends T w hours working and has T hours after allowing for sleep.

12. The Value of Time 12 The Formal Model Each unit of X takes t x hours; Each unit of Y takes t y hours. The consumer spends T w hours working and has T hours after allowing for sleep. t x X +t y Y +T w = T

13. The Value of Time 13 The Formal Model Each unit of X takes t x hours; Each unit of Y takes t y hours. The consumer spends T w hours working and has T hours after allowing for sleep. t x X +t y Y +T w = T p x X +p y Y = wT w + V

14. The Value of Time 14 The Formal Model p x X +p y Y = wT w + V

15. The Value of Time 15 The Formal Model p x X +p y Y = wT w + V t x X +t y Y +T w = T

16. The Value of Time 16 The Formal Model p x X +p y Y = wT w + V t x X +t y Y +T w = T T w = T – (t x X +t y Y )

17. The Value of Time 17 The Formal Model p x X +p y Y = wT w + V t x X +t y Y +T w = T T w = T – (t x X +t y Y ) (p x +wt x )X +(p y +wt y )Y = wT +V

18. The Value of Time 18 The Formal Model (p x +wt x )X +(p y +wt y )Y = wT +V

19. The Value of Time 19 The Formal Model (p x +wt x )X +(p y +wt y )Y = wT +V F x = p x +wt x F y =p y +wt y

20. The Value of Time 20 The Formal Model F x X + F y Y = wT +V

21. The Value of Time 21 An Illustration

22. The Value of Time 22 An Illustration

23. The Value of Time 23 Some Applications Shopping –Why do senior citizens shop on weekdays and working people on weekends? Different values of time?

24. The Value of Time 24 Some Applications Shopping Dinner Reservations –Restaurants that take reservations must charge more –Thus students will favor restaurants that don’t take reservations –High wage earners will favor a policy of reservations.

25. The Value of Time 25 Some Applications Shopping Dinner Reservations Automobiles or Mass Transit –Mass transit is cheaper but slower, hence its appeal to low income households.

26. The Value of Time 26 Some Applications Shopping Dinner Reservations Automobiles or Mass Transit Convenience Foods –Time is money

27. The Value of Time 27 End ©2005 Charles W. Upton