Opportunity Cost and Supply in Economics

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Questions and Answers

Why are poor people more likely to travel by bus compared to wealthy people?

Wealthy people prefer to fly. (correct)

Wealthy people value their time more. (correct)

Buses are cheaper than flying.

Poor people have lower opportunity costs. (correct)

The opportunity cost of a activity only applies to wealthy individuals.

False

What factor tends to affect the availability of teenage babysitters in wealthy neighborhoods?

Generous allowances

During a recession, poor job prospects reduce the opportunity cost of staying in college, leading to more students considering spending another year or two to obtain a ______.

graduate degree Signup and view all the answers

Why do more young people from low-income regions join the military?

Military offers guaranteed income. Signup and view all the answers

What typically has a 'cost' according to the economic perspective discussed?

Actions or decisions Signup and view all the answers

The cost of purchasing an item, like a baseball, can vary depending on the associated ______.

actions Signup and view all the answers

¿Cuál es el costo de oportunidad en la decisión de viajar entre ciudades?

El costo de oportunidad se refiere al valor del tiempo que se pierde al elegir un medio de transporte más barato, como el autobús, en lugar de volar. Signup and view all the answers

¿Por qué es más difícil encontrar niñeras adolescentes en áreas residenciales ricas?

Debido a que los adolescentes prefieren actividades de ocio o citas que les brindan mejores alternativas que cuidar niños. Signup and view all the answers

¿Por qué más estudiantes de college continúan en la escuela de posgrado durante una recesión?

Porque las malas perspectivas laborales reducen el costo de oportunidad de permanecer en la universidad. Signup and view all the answers

¿Por qué más jóvenes de regiones de bajos ingresos son más propensos a unirse a las fuerzas armadas?

Porque las oportunidades de trabajo son limitadas y el costo de oportunidad de unirse a las fuerzas armadas es más bajo. Signup and view all the answers

Los costos están asociados a cosas más que a acciones.

False Signup and view all the answers

¿Qué representa el costo de un béisbol de liga mayor?

El costo de un béisbol es la acción de comprarlo, que tiene un costo de oportunidad asociado. Signup and view all the answers

¿Qué se entiende por 'costo de oportunidad'?

Es el valor de la mejor alternativa a la que se renuncia al elegir hacer algo. Signup and view all the answers

Study Notes

Opportunity Cost and Supply

The economics of supply are similar to the economics of demand.
Decision-makers choose from alternatives and their decisions reflect a cost-benefit analysis.
Opportunity costs are the value of the next best alternative that is forgone when making a choice.
Forgone opportunities are costs, and not the things themselves.

Examples of Opportunity Costs

Travel - Wealthy people are less likely to take the bus because they place a high value on their time, as they have a high income and opportunity cost.
Babysitters - The availability of teenage babysitters is linked to the opportunity cost of their time. In high-income neighborhoods, teenagers have more leisure time than in low-income areas, and therefore may choose leisure over babysitting.
Education - During a recession, students are more likely to continue on to graduate school because the opportunity cost of attending school is lower, as there are fewer job opportunities.
Military - More people from low-income regions join the military because it provides a stable source of income and other benefits.

Misconceptions about Costs

The economic way of thinking states that costs are tied to actions, not things.
Common sense assumes that things have inherent costs, which is incorrect.
Purchasing a good, manufacturing a good, selling a good, and receiving a good are all actions.
Each of these actions has a cost, which may vary depending on the circumstances.
The cost of higher education should not be looked at as the cost of education but rather the opportunity cost of giving up other activities which was given up to attend college.

Opportunity Costs

Poor people are more likely to travel by bus than wealthy people, even though bus travel is cheaper because time is a significant opportunity cost
Wealthier people have a higher opportunity cost for time, while poorer people have a lower opportunity cost for time
Finding a teenage babysitter in a wealthy area is harder than in a low-income area because teenagers in wealthier areas often have more valuable alternative opportunities
Students are more likely to attend graduate school during recessions because job prospects are lower reducing the opportunity cost of further education
Young people from low-income regions are more likely to join the military because it presents a more attractive opportunity compared to limited job prospects

Costs are Tied to Actions, not Things

Costs are not fixed, and they are always tied to actions, decisions, and choices
There are no objective costs; costs are determined by the value you place on alternative choices
The cost of a thing is determined by the action associated with it. For example, the cost of a baseball depends on how it's acquired (manufactured, purchased, given as a gift)
A baseball itself does not inherently have a cost, but the action of acquiring it does
The cost of education is not inherent, but is instead determined by the alternative opportunities forgone

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Description

This quiz delves into the concepts of opportunity cost and supply, highlighting how decision-makers weigh alternatives. Through various examples, the quiz illustrates the impact of opportunity costs in different scenarios such as travel, babysitting, and education. Test your understanding of these economic principles and their real-world implications.