A Travel-Cost Example

Now it is time for your first consulting job as an environmental economist. The Forest Service would like to know whether it should set aside some national forestland, previously slated to be logged, for hiking. You are helping with 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 technique called regression analysis, you have controlled for differences in 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:

1. Graph the demand curve for hiking trips as a function of the "price"-the travel cost.

2. Based on 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. For the average person, calculate

(1) the consumer surplus for a single visit to the new park;

(2) the total consumer surplus for an average visitor (Hint: the area of a triangle is 1/2[B * H]); and (3) the total expected consumer surplus per year from the proposed park.