Economics for Decision Making

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

1ECONOMICS ASSIGNMENT
Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................4
Answer 3..........................................................................................................................................6
Answer 4..........................................................................................................................................7
Answer 5........................................................................................................................................10
Reference List................................................................................................................................11

2ECONOMICS ASSIGNMENT
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
Producti on Possibility Curve
Work Hours
Grade (%)
Figure 1: Production Possibility Curve
a)
ii)
Production Possibilities
Grade
(%) Work (hours per week)
Opportunity
cost
A 0 60 0
B 20 55 0.36
C 40 45 0.89
D 60 30 2.00
E 80 0
Opportunity cost is the cost of sacrificing the next best alternative. The production possibility
curve represents the amount of two goods that a person can use at a given amount of time and
money. As the working hours goes down, Joan can put more hours into studies resulting in

3ECONOMICS ASSIGNMENT
increased percentage in the grades. Increase in grade percentage of Joan requires sacrifice of
more and more work hours (Calman and Ross 2013). This indicates an increasing opportunity
cost resulting in a concave PPC.
a)iii) If the opportunity cost of Joan increasing her grade was constant regardless of how many hours she
worked, the slope of the Production Possibility Curve(PPC) will be a straight line.
Figure 2: PPC with constant slope
PPC is more likely to be concave in shape indicating the fact of increasing opportunity
cost. Resources used in the production process are not perfect substitutes and therefore, cannot
produce all goods with equal efficiency. As more and more resources shift from one industry to
other the opportunity cost increases making the PPC concave.
a)iv) Points inside the PPF represents that resources are not efficiently used. When resources are
efficiently used, they lie on the PPF. Joan’s combination of her grades and hours of work per week
were below (inside) the curve as resources are inefficiently allocated.