Econ 201 Lecture 11
Example 11.1.
How should Leroy divide his time between picking apples and writing pulp fiction?
A men's magazine will pay Leroy 10 cents per word to write fiction articles.
He must decide how to divide his time
between writing fiction, which he can do at a constant rate of 200 words per hour, and harvesting apples from the trees
growing on his land, a task only he can perform.
His return from harvesting apples depends on both the price of apples and
the quantity of them he harvests.
Earnings aside, Leroy is indifferent between the two tasks.
The amount of apples he can
harvest depends, as shown in the table below, on the number of hours he devotes to this activity:
Hours
Total bushels
Additional bushels
8
1
8
4
2
12
3
3
15
2
4
17
1
5
18
For each hour Leroy spends picking apples, he loses the $20 he could have earned writing pulp fiction.
He should thus spend an additional hour picking as long as he will add at least $20 worth of apples to his total
harvest.
For example, if apples sell for $2.50 per bushel, Leroy would earn $20 for the first hour he spent picking apples, but
would earn only an additional $10 if he spent a second hour.
Thus, at a price of $2.50 per bushel, Leroy would allocate 1
hour to picking apples, during which time he will harvest 8 bushels.
If the price of apples then rose to $5 per bushel, it would pay Leroy to devote a second hour to picking, which
would mean a total of 12 bushels of apples.
Once the price of apples reached $6.67 per bushel, he would devote a third hour
to picking apples, for a total of 15 bushels.
If the price rose to $10 per bushel, he would pick for four hours and get 17
bushels.
And, finally, once the price of apples reached $20 per bushel, Leroy would supply five hours of applepicking
services, and would harvest 18 bushels of apples.
Leroy's individual supply curve for apples relates the amount of apples he is willing to supply at various prices.
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 Spring '08
 Staff
 Economics, Microeconomics, Macroeconomics, Leroy

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