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Opportunity Cost
Haley Floyd
AIU-A

















Economics has to do with our everyday living. This paper discusses the terms opportunity cost, production possibility frontier, comparative advantage, and absolute advantage. Finally the conclusion with my extension with the narrative
Suppose that two people, Michelle and James each live alone in an isolated region. They each have the same resources available, and they grow potatoes and raise chickens. If Michelle devotes all her resources to growing potatoes, she can raise 200 pounds of potatoes per year. If she devotes all her resources to raising chickens, she can raise 50 chickens per year. (If she apportions some resources to each, then she can produce any linear combination of chickens and potatoes that lies between those extreme points. If James devotes all his resources to growing potatoes, he can raise 80 pounds of potatoes per year. If he devotes all his resources to raising chickens, he can raise 40 chickens per year. (If he apportions some resources to each, then he can produce any linear combination of chickens and potatoes that lies between those extreme points.)
Opportunity Cost is what your giving up to get what you want(Krugman,Wells 2009). The first question Is what is Michelle opportunity cost of producing potatoes? Michelle's opportunity cost is ¼ of a chicken. Michelle is giving up all her resources to produce the 200 potatoes. ¼ came from 50chickens/200potatoes. The next question is what is Michelle's opportunity cost of producing chickens? Michelle’s opportunity cost of producing chickens is 4 potato. Same questions for James apply.   James opportunity cost of producing potatoes is ½ of a chicken. James opportunity cost of producing chickens is 2 potatoes.   Economics is all about being visual too. To visually see this a production possibility frontier chart is created. A production possibility frontier chart is
Potential problems
What is Absolute Advantage?...

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