Economics in Decision Making - Study Material and Solved Assignments

Running head: ECONOMICS IN DECISION MAKING
Economics in Decision Making
Name of the Student
Name of the University
Author note

ECONOMICS IN DECISION MAKING1
Table of Contents
Question 1..................................................................................................................................2
Question a...............................................................................................................................2
Question b..............................................................................................................................3
Question 2..................................................................................................................................4
Question a...............................................................................................................................4
Question b..............................................................................................................................5
Question 3..................................................................................................................................6
Question a...............................................................................................................................6
Question b..............................................................................................................................6
Question c...............................................................................................................................7
Question 4..................................................................................................................................7
Question a...............................................................................................................................7
Question b..............................................................................................................................7
Question c...............................................................................................................................8
Question 5..................................................................................................................................8
List of References....................................................................................................................10

ECONOMICS IN DECISION MAKING2
Question 1
Question a
i)
Figure 1: Production Possibility Curve for Joan
ii)
Table 1: Table showing increasing opportunity cost
Table 1 shows opportunity cost of work hours for grades increases with increase in
work hours. Rate of fall in grade increases with every unit increase work hours (Elsner,
Heinrich and Schwardt 2014). The increasing opportunity cost further explains the shape of
PPC as obtained in figure 1.

ECONOMICS IN DECISION MAKING3
iii)
In case constant opportunity cost of Joan, production possibility curve is obtained as a
straight line. Of the two shapes of PPC, the one obtained in figure 1 is more likely to occur
because opportunity cost generally increases with unit increase in goods rather than remain
constant with every unit of production.
Figure 2: Joan’s production possibility curve with constant opportunity cost
iv)
Joan is allocating her resources inefficiently in case combination of work hours and grade
below the frontier.
v)
Joan can push the optimal combination outside the current curve by raising her efficiency in
obtaining more grades along with increasing work hours.
Question b
People in the economy face scarcity problem because of unlimited wants and limited
resources. With sufficient amount of money people also face scarcity problem due their