Economics Workshop
Chapter 1
Questions
1. Explain the concept of opportunity cost.
Opportunity cost is that which has to be forgone in order to obtain a good or service
2. List goods, or services, that compete for your income. Similarly, list activities that compete for your time. In deciding what you will spend your income on and how you will allocate your time, do you minimize your opportunity costs?
Goods or services competing for your income might include rent, food, heating and travel. Activities competing for your time might include studying, work, sleep and leisure activities, such as the cinema, drinking and sport.
In assessing whether you minimize your opportunity costs you need to examine what you decided to do, or consume, and compare these with what you decided not to do, or consume. If you minimized your opportunity costs, then you have chosen all the things that provide you with the maximum amount of benefit.
3. Consider whether it is ever possible to solve the problem of scarcity.
No, because resources are finite and wants are unlimited.
4. An economy produces two goods, Ferraris and Ray-Ban sunglasses. Using a production possibility frontier assess what must happen to the production of Ferraris, if the production of Ray-Ban sunglasses decreases.
Production of Ferraris would increase.
5. The same Ferrari and Ray-Ban economy receives an influx of migrant workers. What do you think will happen to the production possibility frontier for this economy?
It would move outwards to the right.
6. How does the production possibility frontier illustrate the concept of opportunity cost?
It depicts the trade-off between goods and/or services produced. As resources are used for the production of one commodity those resources cannot be used for the production of another.
7. Why does the law of diminishing returns require the production possibility frontier to be curved, rather than a straight line?
The slope of the production
Questions
1. Explain the concept of opportunity cost.
Opportunity cost is that which has to be forgone in order to obtain a good or service
2. List goods, or services, that compete for your income. Similarly, list activities that compete for your time. In deciding what you will spend your income on and how you will allocate your time, do you minimize your opportunity costs?
Goods or services competing for your income might include rent, food, heating and travel. Activities competing for your time might include studying, work, sleep and leisure activities, such as the cinema, drinking and sport.
In assessing whether you minimize your opportunity costs you need to examine what you decided to do, or consume, and compare these with what you decided not to do, or consume. If you minimized your opportunity costs, then you have chosen all the things that provide you with the maximum amount of benefit.
3. Consider whether it is ever possible to solve the problem of scarcity.
No, because resources are finite and wants are unlimited.
4. An economy produces two goods, Ferraris and Ray-Ban sunglasses. Using a production possibility frontier assess what must happen to the production of Ferraris, if the production of Ray-Ban sunglasses decreases.
Production of Ferraris would increase.
5. The same Ferrari and Ray-Ban economy receives an influx of migrant workers. What do you think will happen to the production possibility frontier for this economy?
It would move outwards to the right.
6. How does the production possibility frontier illustrate the concept of opportunity cost?
It depicts the trade-off between goods and/or services produced. As resources are used for the production of one commodity those resources cannot be used for the production of another.
7. Why does the law of diminishing returns require the production possibility frontier to be curved, rather than a straight line?
The slope of the production