Question

Explain the following situations by applying the concept of opportunity cost.

a) More people choose to get graduate degrees when the job market is poor.

b) More people choose to do their own home repairs when the economy is slow and hourly wages are down.

c) There are more parks in suburban than in urban areas.

d) Convenience stores, which have higher prices than supermarkets, cater to busy people.

e) Fewer students enroll in classes that meet before 10:00 am.

Answer 1

a) More people choose to get graduate degrees when the job market is poor.: When the job market is poor, giving up the opportunity to do a job means leaving the opportunity to get a low paying work. So essentially when the job market is low, students have to give up a lower salary to study than if the job market is high. So the opportunity cost is low.

b) More people choose to do their own home repairs when the economy is slow and hourly wages are down.: If the economy is slow and hourly wages are down, people are better off doing their own home repairs than taking up employment somewhere else. The employment would pay them less. So they are giving up less payment for doing their house jobs instead of giving up more payment when the economy is up. So the opportunity cost is low.

c) There are more parks in suburban than in urban areas.: In Urban areas the cost of real estate is very high. So it is better to develop them into commercial projects than making them into parks. So basically the opportunity cost of giving up a commercial project or a piece of real estate in Uran areas is much higher than suburban areas. Since the opportunity cost is low, so suburban areas have more parks.

d) Convenience stores, which have higher prices than supermarkets, cater to busy people.: Busy people value their time over the cost of products. So they lose less time at a convenience store than they do at a supermarket. Since the opportunity cost of their lost time is lower in convenience store so even the higher prices seem acceptable to them and they shop there.

e) Fewer students enroll in classes that meet before 10:00 am.: Before 10:00am, the students have to give up on early morning sleep which is far more valueable than sleeping late in the day to the students. Getting up early is much harder to do than getting up late. So if students give up on sleep in the early morning, they have to incur a higher opportunity cost. So it is better to enroll in classes that start late where the opportunity cost of sleep is low.

If you found this helpful, please rate it so that I can have higher earnings at no extra cost to you. This will motivate me to write more.