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

The opportunity cost of the consultant growing her vegetables is the loss of income she could have earned from her consulting job ($\$200$ per hour). For example, if growing vegetables takes 10 hours per week, the opportunity cost is $\$2000$. If the cost of buying the vegetables she needs for a week is just $\$50$, it makes more economic sense for her to continue working in her consulting job and buy her vegetables, as it maximizes her income and saves valuable time.

Step by step solution

Define the opportunity cost

The opportunity cost of a decision is the value of the best alternative that is given up. In this case, the opportunity cost of the consultant spending time growing vegetables is the income she could have earned working as a consultant during that time.

Calculate the opportunity cost of growing vegetables

Given that the consultant earns $\$200$ per hour, it's important to calculate how much she would lose in terms of income by using her time to grow vegetables. For example, let's assume growing vegetables takes her 10 hours per week. The opportunity cost of this decision would be the lost income from her consulting job during that time (10 hours * $\$200$ per hour = $\$2000$).

Compare the opportunity cost to the cost of buying vegetables

Now, we need to compare the opportunity cost ($\$2000$) with the cost of buying vegetables. Suppose the vegetables the consultant needs for a week cost about $\$50$. The cost of buying these vegetables is significantly lower than the potential income she could have earned from working during that time.

Determine the best economic decision

Based on the comparison between the opportunity cost ($\$2000$) and the cost of buying vegetables ($\$50$), it makes more economic sense for the consultant to continue working in her consulting job and buy her vegetables, rather than trying to grow them herself. This way, she can maximize her income and still have access to the vegetables she wants to consume without wasting her valuable time.

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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

Step by step solution

Define the opportunity cost

Calculate the opportunity cost of growing vegetables

Compare the opportunity cost to the cost of buying vegetables

Determine the best economic decision

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