Consider a change in the table in Problem 2-3. The
student’s set of opportunities is now as follows:
Economics Biology
100 40
90 60
80 75
70 85
60 93
50 98
40 100
Plot this student’s production possibilities curve.
Does the PPC illustrate increasing or decreasing opportunity
costs? What is the opportunity cost to this
student for the additional amount of study time on
economics required to move her grade from 60 to 70?
From 90 to 100?
constant
fsadfsDF
To plot the student's production possibilities curve (PPC), we need to use the student's set of opportunities and allocate each opportunity combination on a graph. The x-axis will represent the amount of time spent on Economics, and the y-axis will represent the amount of time spent on Biology.
Given the student's set of opportunities:
Economics Biology
100 40
90 60
80 75
70 85
60 93
50 98
40 100
To plot the PPC, we will use the data points provided. Each point represents a possible combination of Economics and Biology study time. We will plot these points on a graph and then connect them to form the PPC.
Here is the graph:
(Note: The numbers below represent the coordinates on the graph)
(100, 40) |------------|---------|---------|---------|---------|---------|
(90, 60) |-------------|----------|---------|---------|---------|---------|
(80, 75) |--------------|-----------|----------|---------|---------|---------|
(70, 85) |---------------|------------|-----------|----------|---------|---------|
(60, 93) |----------------|-------------|------------|-----------|----------|---------|
(50, 98) |-----------------|--------------|-------------|------------|-----------|----------|
(40, 100) |------------------|--------------|-------------|------------|-----------|-----------|
Looking at the PPC, we can observe that it is concave to the origin, meaning that the opportunity costs are increasing. This is because as the student allocates more time to one subject, the trade-off becomes larger, resulting in diminishing returns.
To calculate the opportunity cost for the additional amount of study time on Economics required to move her grade from 60 to 70, we can use the concept of the slope of the PPC. The slope gives us the opportunity cost of producing one more unit of Biology at the expense of Economics.
Using two data points, (70, 85) and (60, 93), we can find the slope:
Opportunity cost = (Change in Biology) / (Change in Economics)
Opportunity cost = (85 - 93) / (70 - 60)
Opportunity cost = (-8) / (10)
Opportunity cost = -0.8
So the opportunity cost for the additional amount of study time on Economics required to move her grade from 60 to 70 is -0.8 units of Biology.
Similarly, to calculate the opportunity cost for moving her grade from 90 to 100, we can use the data points (100, 40) and (90, 60):
Opportunity cost = (Change in Biology) / (Change in Economics)
Opportunity cost = (40 - 60) / (100 - 90)
Opportunity cost = (-20) / (10)
Opportunity cost = -2
Therefore, the opportunity cost for the additional amount of study time on Economics required to move her grade from 90 to 100 is -2 units of Biology.