--%>
Assignment Help - homework help

Slope of the budget line and the opportunity cost

Consider someone won $15 on a Lotto Canada ticket at the local 7-Eleven & decided to spend all the winnings on bags of peanuts and candy bars. The cost of candy bars is estimated as $.75 and the cost of peanuts is $1.50. Plot the data in this table as a budget line in a graph. Explain the slope of the budget line and the opportunity cost of one more candy bar? Of one more bag of peanuts? Do these opportunity costs increase, fall, or remain constant as each added unit of the product is purchased.

E

Expert

Verified

435_Slope for the budget line.png

The slope for the budget line above, along with candy bars on the horizontal axis, is -0.5 (= -Pcb/Pbp). Note down that the figure could also be drawn along with bags of peanuts on the horizontal axis. The slope of budget line would be -2. The opportunity cost of one more candy bar will be ½ of a bag of peanuts. The opportunity cost of one more bag of peanuts will be 2 candy bars. These costs are constant. They can be found through comparing any two of the consumption option for the two goods.

 

   Related Questions in Finance Basics

  • Q : Question on budget line On a Lotto

    On a Lotto Canada ticket A person won $15 at the local 7-Eleven & decided to spend all the winnings money on bags of peanuts and candy bars. The cost of candy bars= $.75 and the cost of peanuts = $1.50. a. In general, how woul

    		•
  • Q : Describe Form 9 Form 9 : It is the

    Form 9: It is the request by department for space planning services (example, new or extra space lease extensions, or renewals in non-institutional) and also evaluated by the Department of Finance.

    		•
  • Q : What is Operating Expenses and Equipment

    Operating Expenses and Equipment (OE&E): This is a class of a support appropriation which comprises objects of expenditure like general expenses, communication, printing, travel, data processing, tools, and accessories for the equipment.

    		•
  • Q : Recognizes and state the significance

    Normal 0 false false

  • Q : Explain Budget Cycle Budget Cycle : The

    Budget Cycle: The time period needed to made a state financial plan and enacts that part of it applying to the budget year. The Significant events in the cycle comprise: • The preparation of G

    		•
  • Q : Sensitivity analysis report ABC Company

    ABC Company manufactures three types of products and has provided you with the following linear problem: Max Z=15X1+20X2+14X3 (Total profit)s.t.5X1+6X2+4X3<=210 (Total labor hours available)10X1+8X2+5X3<=200

    		•
  • Q : Describe Schedule 7A Schedule 7A : The

    Schedule 7A: The summary version of the State Controller’s Office detailed Schedule 8 position register for each department. The information replicated in this schedule is the base for the “Salaries and Wages Supplement” exhibited on

    		•
  • Q : Effect of foreign imports Normal 0

    Normal 0 false false

    		•
  • Q : Influence of working capital in the

    How and why does working capital influence the incremental cash flow estimation for a proposed large capital budgeting project? Describe. Several large projects need additional working capital. This investment in additional working capital bec

    		•
  • Q : Define Budget Budget : It is a plan of

    Budget: It is a plan of operation stated in terms of financial or other resource necessities for a particular period of time.

    		•