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21 Ιαν 2020 · Description. Example: The tradeoff between consumption goods and investment goods. Visualizing scarcity, choice, and opportunity cost in the PPC diagram. Possible shifts in the PPC. Using the PPC diagram to think about the implications of policy choices. Economics 2 Spring 2020.
Consumers face a trade-off. If a car is bought for £15,000 and after 5 years the value depreciates by £5,000, the opportunity cost of keeping the car is £5,000 (which could have been gained by selling the car), regardless of the starting price. Opportunity cost is important to economic agents, such as consumers, producers and governments.
We can observe the Law of Increasing Additional Cost by measuring the trade-offs on the PPC. Notice that in moving from combination A to B, we gained 10 Tablets but gave up producing 2 Smartphones.
Economic profit is total revenue minus opportunity cost. Accounting profit is total revenue minus explicit cost. Opportunity costs are higher than explicit costs because opportunity costs also include implicit costs. As a result, economic profits are lower than accounting profits.
there is a trade off between the two goods, demonstrating the principles of scarcity and opportunity cost. To find the slope using two points on the PPF, you need the x- and y-coordinates of the points. For example, (2, 9) and (4, 6) are two points on the PPF in the graph on the previous page. To find the slope between them, take the change in
22 Μαρ 2021 · Opportunity cost. Trade-off. Opportunity cost is the cost of missing out on the next best alternative. In other words, opportunity cost represents the benefits that could have been gained by taking a different decision.
• Opportunity cost –Whatever must be given up to obtain some item –Measures the trade-off between the two goods that each producer faces Professor Galvez-Soriano lecture notes. Based on N. Gregory Mankiw, Principles of Microeconomics, 9th 11 Edition.
