Business, 05.05.2020 02:14, serenityarts123

Explain precisely why ‘Opportunity Cost' is always a RELATIVE concept and is never to be construed in ABSOLUTE terms. In addition, why is the PPF function never strictly convex -what is the economic implication of strict convexity? You are free to provide appropriate examples of your choice.

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answered: jessnolonger

See the explanation below.

Explanation:

a. Explain precisely why ‘Opportunity Cost' is always a RELATIVE concept and is never to be construed in ABSOLUTE terms.

Opportunity cost is always a relative concept because it considers the benefits or gains that must be missed or forgone in order to chose one economic activity or option over others.

Opportunity cost is measured as the difference between the return on best foregone option and the return on chosen option . For example, if a $100,000 investment A with a return of 6% is chosen over another $100,000 investment B with a return of 8%, the opportunity cost is 2% (i.e. 8% - 6% = 2%).

On the other hand, absolute terms only consider the difference between the absolute value of two options. For example, if an investment A provide $5,000 revenue,while investment B provides $4,500 revenue; the absolute difference is $500.

b. In addition, why is the PPF function never strictly convex -what is the economic implication of strict convexity?

PPF function is never strictly convex due to the fact that there are no goods that are totally the same in real life. This implies there are no perfect substitutes in real life.

The economic implication of strict convexity is that when we have two dimensions that have an attribute of strict monotonic preferences as well as two consumption bundles that are each on the same indifference curve denoted as y, any point on a line that link the two points, apart from their own points, will lie on an indifference curve that is higher than y.

answered: Guest

24 years, i believe is the correct answer.

answered: Guest

x=3

step-by-step explanation:

this is really simple i saw that there was only one term (5x) and thought if that was 15 what would i have to multiply everything else to get it there? well if 5x became 15 then x would have to be 3 so plug the 3 in the x for the other equations and you get 15 for the other ones. so there you go. : )

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Explain precisely why ‘Opportunity Cost' is always a RELATIVE concept and is never to be construed i...