Question

To get the most out of life, to think like an economist, you have to be know what you're giving up in order to get something else. So, opportunity cost is the value of what you get expressed as the amount of what you give up the opportunity cost of "X" is the amount of "Y" forgone by the choice of "X"). Comment on the five examples below; either ask a question about any of the 5 examples, explain any one of the five examples OR post one example of an opportunity cost trade-off. Example what you give up X = what you get opportunity cost of one unit of X assume 80 pages of a novel 2 episodes of game of thrones 40 pages of a novel ceteris paribus 20 gallons of milk 1 bushel of corn 20 gallons of milk ceteris paribus 1 spouse and 3 kids 1 career in investment banking 1 spouse and 3 kids ceteris paribus 3 coconuts 2/3 fish ceteris paribus 2 fish (O food units, 10 clothing units) (8 food units, O clothing units) 1.25 clothing units constant rate of substitution

Answer 1

Solution

1.What would you choose : to Read 80 pages of novel (or) to watch 2 episodes of game of thrones ?

2.What would you prefer ? : To produce 20 gallons of milk (or) to produce 1 bushel of corn instead ?

3.

You have to choose from among the 2 choices : Choice 1 - To have a spouse and 3 kids (or)

Choice 2 - To have a career in investment banking

4.The opportunity cost of having 3 coconuts is 2 fish.In other words,you need to sacrifice 2 fish in case you make a choice of choosing to have 3 coconuts

5.You can choose among the 2 choices available :

Choice 1 - 10 Clothing Units

Choice 2 - 8 Food Units

So you can either have 10 units of Clothing (or) 8 Food Units

So,the opportunity cost of having 10 Clothing Units is 8 Food Units

The opportunity cost of having 8 Food Units is having 10 Clothing Units

Ceterus Paribus means - under all the other conditions remaining the same.

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