econ1001_tutorial01

econ1001_tutorial01 - Question 1 c You can either watch a...

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Unformatted text preview: Question 1 c You can either watch a movie or babysitting. The benefit for you to watch movie is $150 and the ticket cost is $60. The benefit of babysitting is $200 and the cost of it is $40 (travelling cost, unpleasantness…) c (i) what is the economic surplus of watching movie? Should you take this activity? c (ii) what is the economic surplus of private tutoring? Should you take this activity? To calculate economic surplus of an activity c (i) Economic surplus of watching movie = benefit – explicit cost – implicit cost = 150 – 60 (ticket fee) – value of babysitting = 150 – 60 – (200 – 40 ) = -$70 c You should not watch a movie ** Notice that the value of babysitting = benefit of babysitting – explicit cost of babysitting To calculate economic surplus of an activity c (ii) Economic surplus of babysitting = benefit – explicit cost – implicit cost = 200 – 40 (travelling cost and psychological cost) – value of watching movie = 200 – 40 – (150 - 60 ) = $70 c You should babysitting ** Notice that the value of watching movie = benefit of watching movie – explicit cost of watching movie Suppose you want to watch Sammi’s concert on...
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econ1001_tutorial01 - Question 1 c You can either watch a...

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