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Chapter 2: Problem 27

Use this information to answer the following 4 questions: Marie has a weekly budget of \(\$ 24,\) which she likes to spend on magazines and pies. What is Marie's opportunity cost of purchasing a pie?

Short Answer

Expert verified
The opportunity cost of buying one pie is \(x\) magazines, where \(x\) is the number of magazines Marie can buy for one pie. The exact number of magazines cannot be determined with the information provided.

Step by step solution

01

Identify the costs

Let's denote the cost of a pie as \(P_p\), and the cost of a magazine as \(P_m\). We don't have the exact prices, but we know Marie's weekly budget is $24, which she likes to spend on both items.
02

Assume an exchange rate of pies and magazines

Since we don't know the cost of a pie and magazine, let's assume we know the 'exchange rate' which is the number of magazines that can be bought for one pie. Let's denote this rate as \(x\), and it means that: \(P_p = xP_m\)
03

Write a budget constraint equation

Now, let's assume that Marie buys \(n_p\) pies and \(n_m\) magazines in a week. As Marie spends her entire budget on pies and magazines, we can write a budget constraint equation: \(P_p n_p + P_m n_m = 24\)
04

Find the opportunity cost

Opportunity cost is the number of magazines given up in exchange for buying a pie. So let us find this out in terms of \(x\). Since \(x\) is the number of magazines that can be exchanged for one pie, that means Marie needs to sacrifice \(x\) magazines to buy one pie. So, the opportunity cost of buying one pie is \(x\) magazines. The problem doesn't have enough information to find the exact opportunity cost (number of magazines). But given the cost of pies and magazines, the opportunity cost would be the number of magazines Marie could have bought instead of buying a pie.

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