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    Economix

    Aight guyz...I'm taking my first ever economix course...microeconomics and well..I'm kinda stumped on opportunity costs. I know opp. costs were in managerial accounting..but I don't remember anything about it.

    So......help!!

    btw...this is just the first of many many many questions to come http://www3.pak.org/gupshup/smilies/smile.gif

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    "Labaik, Allahumma Labaik, Labaik La Sharika Laka Labaik, Innal Hamda Wa N'amata Laka Wal Mulk, La Sharika Lak." "Here I am at your service, O Allah, here I am. Here I am at your service and no partners do you have. Verily All Praise and All Bounty belong to you, and Yours alone is The Sovereignty. No partners do you have."
    22.1 . O mankind! Fear your Lord . Lo! the earthquake of the Hour ( of Doom ) is a tremendous thing .

    #2
    Economists define the "opportunity cost" of any good or service as the value of all the other goods or services that we must give up in order to produce it

    It is kind of a trade-off
    Example: To get good grades in exams you will cut down your time at gupshup therefore your sacrifice of gupshup-time for exams is kind of an opportunity cost.... I don't know if I made sense http://www3.pak.org/gupshup/smilies/smile.gif

    Comment


      #3
      ya it sorta makes sense.

      So like a mother with a new born child that stays at home..does not get paid. SO the opportunity cost is her salary right??

      Wat about low and high opportunity costs?

      ------------------
      "Labaik, Allahumma Labaik, Labaik La Sharika Laka Labaik, Innal Hamda Wa N'amata Laka Wal Mulk, La Sharika Lak." "Here I am at your service, O Allah, here I am. Here I am at your service and no partners do you have. Verily All Praise and All Bounty belong to you, and Yours alone is The Sovereignty. No partners do you have."
      22.1 . O mankind! Fear your Lord . Lo! the earthquake of the Hour ( of Doom ) is a tremendous thing .

      Comment


        #4
        I think higher and lower opportunity costs depends on the skills of the mother i.e. if she is more skilled and potentially can earn a lot of money then the opportunity costs are high and vice versa.

        Comment


          #5
          ermmm I think I'm understanding this...

          ------------------
          "Labaik, Allahumma Labaik, Labaik La Sharika Laka Labaik, Innal Hamda Wa N'amata Laka Wal Mulk, La Sharika Lak." "Here I am at your service, O Allah, here I am. Here I am at your service and no partners do you have. Verily All Praise and All Bounty belong to you, and Yours alone is The Sovereignty. No partners do you have."
          22.1 . O mankind! Fear your Lord . Lo! the earthquake of the Hour ( of Doom ) is a tremendous thing .

          Comment


            #6
            I lied, I still don't understand opportunity costs. Also, how do you know if an opportunity cost is high or low??

            Another question...what is elasticity. What makes a product elastic or inelastic. Please don't give me the formula..u know the percentages stuff or its greater than 1 so its elastic..less than 1 so its inelastic.

            ------------------
            "Labaik, Allahumma Labaik, Labaik La Sharika Laka Labaik, Innal Hamda Wa N'amata Laka Wal Mulk, La Sharika Lak." "Here I am at your service, O Allah, here I am. Here I am at your service and no partners do you have. Verily All Praise and All Bounty belong to you, and Yours alone is The Sovereignty. No partners do you have."
            22.1 . O mankind! Fear your Lord . Lo! the earthquake of the Hour ( of Doom ) is a tremendous thing .

            Comment


              #7
              Hinna. Opportunity costs? Hmm. Just keep in mind that it is not any kind of even vaguely scientific law. It is simply a useful idea. Most people when they talk about the cost of something mean how much money they have to spend. The idea of opportunity costs is to look behind this and ask what we have to give up in order to acquire certain products. It is the benefit lost from the next best alternative. In many instances the money cost is as good an approximation as we can hope to get. But there are instances when it is wide of the mark. Take a museum on a weekday morning with very few people in it. The extra resources we have to sacrifice to admit a few more people are infinitesmal. Take the same museum with a popular exhibition on a Sunday afternoon. The cost of every extra visitor is, in the short term, the inconvenience of queuing and lesser enjoyment for those who are already in it. In the longer term it is seen in a greater expenditure on museum staff, maintenance and perhaps in the end an enlarged building. I leave the implications for the debate on charging for you to think about.

              Comment


                #8
                Elasticity? Hmm. Well, this is basically to do with how rapidly changes in quantity of a good respond to changes in price. It is a measure of the degree of responsiveness. You are aware of the formula so that is fine. All it says is this: Supply (or demand) is very elastic if a small change in price results in a large change in quantity. Very inelastic if a large change in price results in only a very small change in quantity. Will footie fans buy the same number of tickets if the team jacks up the prices? If yes, then the demand is inelastic. But if those fans end up cutting back their attendance, then demand is elastic. It is sensitive to change. Same thing applies to product supply too. Suppose my local symphony gets away with higher ticket prices because loyal patrons (including me) would keep buying. Would the symphony then decide to play more often and supply more music? Would higher prices mean more music for us? If ticket prices fell, would the orchestra choose to play less often? You see, it's basically the same underlying principle at work here.

                You ask what determines whether firms, households, footy fans or orchestras to respond to price changes. Several things. Firstly, the number of available substitutes. Alternatives. The more of them, the easier for people it is to switch over and avoid price hikes. Let me bring another personal example to show this. At times, I'm a bit thick. Too many times I can't tell the difference between Micahel Jackson and his sisters LaToya and Janet. If everyone was as thick as me - and therefore indifferent - then MJ would not have been able to charge so muc for his albums or sell so many. Because the more available substitutes the more market power consumers have. So elasticity does depend upon the existing number of available alternatives. Also elasticity depends upon if there exist complements to the products. If people like to consume things alongside their complements, like fish and cips, salt and pepper, then a price hike in one good will lower the demanded quantity of both goods. Elasticity measures how strong this responsiveness is.

                Secondly, we can be more elastic if we have more time. Say the president of Pakistan arrives at my local chippy unannounced and demands a filet-o-fish a la McDonald's. The the owner must find that meal pronto. He doesn't have time to go about looking all over town for the right price. He must pay whatever the local fishmonger charges. But say if the president had reserved it few weeks in advance. Then the owner can spend time shopping around for a better deal.

                Another thing which elasticity depends upon is whether the product (or service) takes up much of the firm or household's income. Take a box of matches. It costs a tiny proportion of inome. Even for a poor family. If the geedy matchmakers raise the price, nobody will flinch. Nobody will care. We will just go on buying just as much or little as we have been doing all along. Because our demand is inelastic. Simple really.

                Well, I don't know if any of that made sense. Any questions, just give me a shout.

                Comment


                  #9
                  Thanx!! I got the jist of it a lil while ago. But rest assured..I will be back with more preguntas (questions) http://www3.pak.org/gupshup/smilies/smile.gif

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                  "Labaik, Allahumma Labaik, Labaik La Sharika Laka Labaik, Innal Hamda Wa N'amata Laka Wal Mulk, La Sharika Lak." "Here I am at your service, O Allah, here I am. Here I am at your service and no partners do you have. Verily All Praise and All Bounty belong to you, and Yours alone is The Sovereignty. No partners do you have."
                  22.1 . O mankind! Fear your Lord . Lo! the earthquake of the Hour ( of Doom ) is a tremendous thing .

                  Comment

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