--%>
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 : Financial crisis of India during 1997 I

    I have to explain Financial crisis of India during 1997. Can someone help me in this question ?

    		•
  • Q : Can a corporation contain too much

    Can a corporation contain too much working capital? Describe. A firm can contain too much working capital if this is losing the chance to invest in high returning fixed assets and if this goes beyond the amount of working capital required for r

    		•
  • Q : Explain Unscheduled Reimbursements

    Unscheduled Reimbursements: The Reimbursements collected by an agency which were not budgeted and are accounted for by an individual reimbursement class of an appropriation. To expend unscheduled reimbursements, the budget revision sh

    		•
  • 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.

    		•
  • Q : Explain Feasibility Analysis

    Feasibility Analysis: It is an analysis of the ability to finish a project successfully, taking into account legal, technological, economic, scheduling and various other factors. Instead of just diving into a project and hoping for th

    		•
  • Q : Explain regulations Regulations: It is

    Regulations: It is a rule, order, or standard of common application issued by a state agency to interpret, implement, or make specific law enforced or managed by it, or to govern its measures. With state government, the procedure of adopting or modify

    		•
  • Q : Why do financial managers compute the

    Why do financial managers compute the marginal tax rate?Financial managers utilize marginal tax rates to estimate the future after tax cash flows from investments.  Because they are interested in how much of the next dollar earned through n

    		•
  • Q : What is Indirect Costs Indirect Costs :

    Indirect Costs: The costs which by their nature can’t be readily related with a particular organization unit or program. Similar to general administrative expenses, indirect costs are dispersed to the organizational unit(s) or programs that bene

    		•
  • Q : Laffer Curveand its association to

    Normal 0 false false

  • Q : How are financial trades made in an

    How are financial trades made in an over the counter market?On the contrary to the organized exchanges that have physical locations, the over the counter market contain no fixed location, or more accurately, it is everywhere. The over the counte

    		•