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Econ 1BB3 - Chapter 3 Part 2.docx

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Department
Economics
Course
ECON 1BB3
Professor
Bridget O' Shaughnessy
Semester
Winter

Description
Richard Damra Monday, January 14, 2013 Econ 1BB3 – Dividing Tasks (Lecture 4)  Should your room mate divide household chores evenly?  Example: o There are 2 interior decorators who can paint & wallpaper. They have 40hour work weeks. Martha can paint 20 rooms or wallpaper 5 rooms, Stewart can paint 10 rooms and wallpaper 8 rooms. o First step: draw ppf o Second step: draw table o Read question carefully: Martha is better at painting and Stewart is better at wallpapering # Done in 40 hours Paint Wallpaper Martha 20 5 Stewart 10 8 # Hours need to do 1 room Paint Wallpaper Martha 2 8 Stewart 4 5  Opportunity Cost: Whatever must be given up to obtain some item (eg. Going to university instead of working) Opportunity Cost of 1 room: Paint Wallpaper Martha ¼ 4 Stewart 4/5 5/4  Martha’s opportunity cost of 20 painted room is 5 wallpapered room  Martha’s opportunity cost of 1 painted room is 1/4 wallpaper room  Absolute Advantage: The ability to produce a good
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