--%>
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 : Major effects of this price floor

    Normal 0 false false

  • Q : What is State Operations State

    State Operations (SO): It is a character of expenditure symbolizing expenditures for the support of state government, exclusive of capital investments and expenses for the local assistance actions.

    		•
  • Q : Define Revolving Fund Revolving Fund :

    Revolving Fund: Usually refers to a cash account termed as an office revolving fund (ORF). This is not a fund however an advance from an appropriation. The agencies might use the cash advance to pay out ORF checks for instant requirements, as specifie

    		•
  • Q : Define Settlements Settlements : It

    Settlements: It refers to any proposed or final settlement of the legal claim (generally a suit) against the state. Approval of payments and settlements for settlements are subject to several controls.

    		•
  • Q : What is the Schedule of Operating

    Schedule of Operating Expenses and Equipment, Supplementary: The supplemental schedule proposed by department’s throughout budget preparation that details by object the expenses comprised in the Operating Expenses and Equipment class.

    		•
  • Q : Define the term floor Floor: The

    Floor: The Assembly or Senate chambers or the word employed to explain the location of a bill or the kind of session. Matters might be termed to as “on the floor”.

    		•
  • Q : Define Tort Tort : It is a civil wrong,

    Tort: It is a civil wrong, other than a breach of contract, for which the court awards indemnity. The traditional torts comprise malpractice, negligence, assault and battery. Lately, torts have been widely expanded such that the interference with a co

    		•
  • Q : What is Sinking Fund Sinking Fund : It

    Sinking Fund: It is a fund or account in which money is deposited at customary intervals to offer for the retirement of bonded debt.

    		•
  • Q : Causes and solution to international

    causes and solutions to international bank crisis

    		•
  • Q : Define Limited-Term Position

    Limited-Term Position (LT): Any place that has been authorized only for a particular length of time with a set termination date.Limited-term positions might be authorized throughout the budget procedure or in transactions approved by the D

    		•