Opportunity_sets_and_opportunit

Opportunity_sets_and_opportunit - The Economic Approach...

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The Economic Approach Scarcity Opportunity Sets Trade-offs Opportunity cost Rational choice Exchange Equilibrium Efficiency
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Types of Opportunity Sets Budget constraints Budget, income, wealth Prices Time constraints Time endowment Time requirements Production possibilities Resource endowment Productivity
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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?
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Budget Constraint Movies Lunches 20 10 Not Affordable B u d g e t C o n s r a i Slope = 2 is the opportunity cost of O p y S
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Opportunity Cost Opportunity cost of a movie ½ lunch Opportunity cost of a lunch 2 movies
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Opportunity set concepts Opportunity set – set of available (affordable) bundles Trade-off – available alternatives, more of one means less of the other
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Opportunity_sets_and_opportunit - The Economic Approach...

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