A ferry is currently transporting 300 veh/day at a cost of $1.50/vehicle. The ferry can attract 600 more veh/day when the cost/veh is $1.00. Calculate the net user benefits/year if the cost/veh decreases from $1.10 to $0.95.
What will be an ideal response?
When 300 veh/day, the cost is $1.50/vehicle
When 900 veh/day, the cost is $1.00/vehicle
Construct the demand curve as shown in the figure below. From this curve, one can find
V1 and V2 from the prices provided (from $1.10 to $0.95).
V1 = 780 vehicles per day
V2 = 960 vehicles per day
Determine the net user benefits using Equation 13.1:
Net user benefits = (P1 – P2) (V1 + V2) / 2
Net user benefits = [(1.10 – 0.95) × (780 + 960)] / 2
Net user benefits = $130.50 per day
Next, determine the net user benefits per year.
Yearly net user benefits = 365 × net user benefits
Yearly net user benefits = 365 × 130.50
Yearly net user benefits = $47,632.50
Therefore, the net user benefits per year will be $47,632.50.
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