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Economics 1st Edition by Dean Karlan,Jonathan Morduch
Edition 1ISBN: 978-0073511498Economics 1st Edition by Dean Karlan,Jonathan Morduch
Edition 1ISBN: 978-0073511498 Exercise 1
Consider the following events that change prices. For each one, say whether the opportunity cost of consuming the affected good increases or decreases.
Explanation
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Opportunity cost:
Opportunity cost refers to the value of forgone goods and services to get the other goods and services.
a. Opportunity cost of movie:
Discount of movie ticket reduces the price of movie ticket. This would reduce the opportunity cost of movie ticket.
b. Tax on soft drink:
When the government imposes tax on soft drinks, it leads to increase the price. Thus, opportunity cost of soft drink increases.
c. Reduce subsidy:
Decrease in the corn subsidy reduces the corn subsidy amount. Thus, the opportunity cost of corn subsidy increases.
d. Free flu shot:
Since the flu shot is free of cost, the opportunity cost for flu shot is decreases.
Opportunity cost refers to the value of forgone goods and services to get the other goods and services.
a. Opportunity cost of movie:
Discount of movie ticket reduces the price of movie ticket. This would reduce the opportunity cost of movie ticket.
b. Tax on soft drink:
When the government imposes tax on soft drinks, it leads to increase the price. Thus, opportunity cost of soft drink increases.
c. Reduce subsidy:
Decrease in the corn subsidy reduces the corn subsidy amount. Thus, the opportunity cost of corn subsidy increases.
d. Free flu shot:
Since the flu shot is free of cost, the opportunity cost for flu shot is decreases.
Economics 1st Edition by Dean Karlan,Jonathan Morduch
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