Opportunity_sets_and_opportunity_cost

Opportunity_sets_and_opportunity_cost - much of the other...

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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
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Opportunity Cost Opportunity cost of a movie Opportunity cost of a lunch
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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 Opportunity cost – the foregone alternative, how
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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 doeuvres 30 minutes each Time to clean rooms 1 hour each Trade-off: prepare hors doeuvres or clean rooms Time constraint Multiple Constraints Brussel Sprouts with goat cheese Time = 1 hour Price = $10 Garlic Shrimp Time = 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...
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Opportunity_sets_and_opportunity_cost - much of the other...

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