201-2008_Opportunity_Sets

201-2008_Opportunity_Sets - much of the other good must be...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
The Economic Approach Scarcity Opportunity Sets Trade-offs Opportunity cost Rational choice Exchange Equilibrium Efficiency
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Types of Opportunity Sets Budget constraints Budget, income, wealth Prices Time constraints Time endowment Time requirements Production possibilities Resource endowment Productivity
Background image of page 2
Budget constraint example Budget: $200 per month Alternatives Movies Lunch Prices Price of movies (with popcorn) = $10 Price of lunches (with date) = $20 What bundles can be chosen?
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Budget Constraint
Background image of page 4
Opportunity Cost Opportunity cost of a movie Opportunity cost of a lunch
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Opportunity set concepts Opportunity set – set of available (affordable) bundles Trade-off – available alternatives, more of one means less of the other Opportunity cost – the foregone alternative, how
Background image of page 6
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 8
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 10
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 12
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: much of the other good must be foregone (slope of budget constraint = op. cost of horizontal axis good) • Op. cost of vertical axis good = 1/slope Time constraint example • Hours before party = 6 • Time to prepare hors d’oeuvres – 30 minutes each • Time to clean rooms – 1 hour each • Trade-off: prepare hors d’oeuvres or clean rooms Time constraint Multiple Constraints • Brussel Sprouts with goat cheese – Time = 1 hour – Price = $10 • Garlic Shrimp – Time = ½ hour – Price = $25 • Budget – 4 hours – $50 Multple Constraints example Production possibilities example • Hourly productivity – 20 salads – 10 loaves of bread • Daily production possibilities (8 hours) Production possibilities...
View Full Document

This note was uploaded on 04/15/2008 for the course ECON 201 taught by Professor C.liedholm during the Spring '07 term at Michigan State University.

Page1 / 12

201-2008_Opportunity_Sets - much of the other good must be...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online