Chapter 1: Problem 3

A consultant works for $\$ 200$ per hour. She likes to eat vegetables, but is not very good at growing them. Why does it make more economic sense for her to spend her time at the consulting job and shop for her vegetables?

Short Answer

Expert verified

It makes more economic sense for the consultant to spend her time at the consulting job and shop for her vegetables because the opportunity cost of growing vegetables is the income she could have earned at her consulting job. Since she earns $\$200$ per hour, it is highly unlikely that the value of the vegetables she could grow in an hour would exceed this amount, especially as she is not very skilled at growing them.

Step by step solution

Determine the consultant's hourly wage.

The consultant earns $\$200$ per hour for her consulting job.

Understand opportunity cost.

Opportunity cost refers to the value of the next best alternative that is foregone when a decision is made. In this case, the consultant needs to decide whether to work at her consulting job or grow her vegetables. The opportunity cost of growing vegetables is the income she could have earned at her consulting job.

Calculate income earned from working.

If the consultant chooses to work for one hour instead of spending that same hour on growing vegetables, she will earn $\$200$.

Compare the value of growing vegetables to working.

To consider whether it makes more economic sense for her to grow vegetables, we need to analyze whether the value she would get from growing vegetables is greater than the $\$200$ she could earn from her consulting job.

Make a conclusion based on the opportunity cost.

Since the consultant is not very good at growing vegetables, it is highly unlikely that the value of the vegetables she could grow in an hour would exceed the $\$200$ she could earn from her consulting job. Therefore, it makes more economic sense for her to spend her time at the consulting job and shop for her vegetables.