Economics - Copy (2)

Economics - Copy (2) - alternative use She may want to...

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Stella Ann Freeman is having a difficult time deciding whether or not to purchase a new car. How would understanding the concept of opportunity costs help her make a decision The decision must be made after the following things are known: Cost of the car in terms of price or in terms of the monthly payout to the loan she takes for the car. Alternative Uses of her funds Costs of using an alternate mode of transport. Suppose she has own funds to buy. The opportunity cost of these funds is their best
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Unformatted text preview: alternative use. She may want to invest in stocks that give her 10% return or keep bank deposits that give her 5% returns. she should buy the car only if the returns from the car (interms of saving on other modes of transport) are more than 10%. If this is not so then she should not buy the car and put all money in stocks, as they give her highest return.(among deposits, stocks and car). Therefore, opp cost must be lower than the return on investing in a car....
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