Question

Define household production opportunity costs. What is a trade-off that people usually experience? What are some methods to measure subjective wellbeing? What are some flaws with our current methods?

Answer 1

Household production basically means that the members of the household produce the goods and services that they need. The opportunity cost is the lost income for the time that household members spend in producing the goods and services. They can use this time to offer their services to firms and earn income. The opportunity cost also includes the time that they could have spent in leisure as well.

People experience trade off everyday in every decision they make. Trade off arises when you give up something to get something else that you want. For instance, every day that you choose to go to work and earn income instead of staying home and watching Netflix is an example of a trade off. In this case, you are giving up leisure because you want the money or want to buy goods that you desire with the money.

Subjective well being refers to how people evaluate their lives. Methods to measure subjective wellbeing:

1. Questionnaire- Using a questionnaire, respondents can be asked various questions which help evaluate their subjective well being.

2. Informant Reports- Under this method, the participant's close relatives or friends are asked to answer questions about the participant.

It is not easy to measure the subjective well being. There are some inherent flaws with the methods being used. For instance, if the participants are asked to fill a questionnaire about their life, there are chances that they will hold back information. This comes in the way of effectively evaluating their well being.