Economics for Decision Making | Assignment

Running Head: ECONOMICS FOR DECISION MAKING
Economics for Decision Making
Name of the Student
Name of University
Author’s Note

ECONOMICS FOR DECISION MAKING1
Table of Contents
Answer: 1.........................................................................................................................................2
Answer: 2.........................................................................................................................................4
Answer:3..........................................................................................................................................6
Answer: 4.........................................................................................................................................7
Answer: 5.......................................................................................................................................10
Reference List................................................................................................................................11

ECONOMICS FOR DECISION MAKING2
Answer: 1
a) i) The Production Possibility Curve of Joan is given below.
0 10 20 30 40 50 60 70 80 90
0
10
20
30
40
50
60
70
Production Possibility Curve
Grade (%)
Work (hours per week)
Figure 1: Production possibility curve of Joan
a) ii)
With the help of above table, the concept of increasing opportunity cost can be explained. The
opportunity costs of work hours for grades are computed in the third column. This shows to
devote more and more hours to work Joan has to sacrifice more and more percentage of grades
indicating the tendency of increasing opportunity cost. This actually indicates the slope of PPC
and makes the PPC to bowed outward. (Chen and Schwartz 2013).

ECONOMICS FOR DECISION MAKING3
a) iii) If the opportunity cost of Joan increasing her grade was constant regardless of how many hours
she worked, the Production Possibility Curve(PPC) will be a straight line.
Grades
Constant slope
Working hours
Figure 2: Graph representing constant opportunity cost
In practical world, opportunity costs are more likely to increase rather than being
constant. As the resources used to produce different goods or services are not perfect substitutes
there is a general tendency of increasing the opportunity cost as the resources are relocated from
one industry to another. The shape of PPC in figure 1 thus is more relevant.
a)iv) Points below (inside) the PPF express inefficient allocation of resources. When resources
are efficiently used, they lie on the PPF. Joan’s combination of grades and work hours are not
accurately used up.
a)v) In order to push her combination of her grades and hours of work per week past (outside) the PPF,
Joan needs to reallocate the resources efficiently. Joan has to increase the efficiency per hour both in
work and studies by working harder to shift the PPF rightwards (Goering 2014).