ECN211 L2-Opportunity Cost_BB

ECN211 L2-Opportunity Cost_BB - ECN211...

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 9/19/11 11 ECN 211 Macroeconomic Principles L2. Opportunity Cost and Production Possibility Curves 
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 9/19/11 22 Opportunity Cost When an individual makes a choice they always incur an “opportunity cost” Value of the next best thing you could have done The opportunity cost of any activity is the value of the next best alternative that is given up because of that decision. This is why there is no such thing as a “free lunch”.
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 9/19/11 33 Opportunity Cost Example A tailor may be able to sew either a pair of trousers or two shirts in an hour If the tailor opts to make the trousers, her opportunity cost will be two shirts
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 9/19/11 44 Opportunity Cost of Attending Class What is the opportunity cost of attending this class today? Answer – the next best alternative use of the 50 minutes of time: Sleep Time in the library Watching “Say Yes to the Dress” on TV
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 9/19/11 55 “At the Margin” When we make choices we compare the marginal benefits ( additional   benefit from a decision) against the marginal costs  ( additional  cost from a  decision) The opportunity cost is part of the marginal costs. Remember rational self interest. Ex. When you are deciding to purchase a soda you compare the  marginal benefit( no longer thirsty) with the marginal 
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 9/19/11 66 Production Possibility Curve (PPC) A way of illustrating the concepts of  scarcity  and  opportunity  cost
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This note was uploaded on 09/19/2011 for the course ECN 211 taught by Professor Kingston during the Fall '08 term at ASU.

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ECN211 L2-Opportunity Cost_BB - ECN211...

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