Assignment On Economics For Decision Making

Running head: ECONOMICS FOR DECISION MAKING
Economics for Decision Making
Name of the Student
Name of the University
Student ID

ECONOMICS FOR DECISION MAKING1
Table of Contents
Answer 1....................................................................................................................................2
Answer a.................................................................................................................................2
Answer b................................................................................................................................4
Answer 2....................................................................................................................................4
Answer a.................................................................................................................................4
Answer b................................................................................................................................6
Answer 3....................................................................................................................................7
Answer a.................................................................................................................................7
Answer b................................................................................................................................7
Answer c.................................................................................................................................8
Answer 4....................................................................................................................................8
Answer a.................................................................................................................................8
Answer b................................................................................................................................8
Answer c.................................................................................................................................9
Answer 5..................................................................................................................................10
References................................................................................................................................11

ECONOMICS FOR DECISION MAKING2
Answer 1
Answer a
i.
0 10 20 30 40 50 60 70
0
10
20
30
40
50
60
70
80
90
Production Possibility Curve
Work (hours per week)
Grade (%)
Figure 1: Production Possibility Curve for Joan
ii.
The concept of increasing opportunity cost refers to the idea of increasing rate of sacrifice of
one good for obtaining additional unit of other good. Given the production possibility table of
Joan, the opportunity cost of Joan for work hours as against percentage of grade increase
from point A to point E indicating an increasing opportunity cost (Mochrie 2015). The
increasing opportunity cost explains the concave shape of PPC.

ECONOMICS FOR DECISION MAKING3
iii.
Figure 2: Constant opportunity cost and PPC
In the presence of constant opportunity cost, the production possibility curve of Joan would
become a straight line. The shape of PPC as obtained in figure 1 is more likely than that
obtained in case of constant opportunity cost. This is because in real world, opportunity cost
increases with increase in production of one good. The reasons for increasing opportunity
cost are limited resources and the fact that resources are imperfect substitutes and hence,
cannot be produced all goods with equal efficiency.
iv.
If Joan’s combination of grades and hours of work per week were below the PPC, then this
implies inefficient allocation of resources between grades and hours of work.
v.
Joan could push combination of hours of work and grades outside her PPC by finding more
efficient and time saving method for studying to obtain more grades (Kolmar 2017). This will
enable her to increase hours of work at the same time.