BSEN 401 Lecture Notes - One Unit, Opportunity Cost, Lincoln Near-Earth Asteroid Research

• School: University of Calgary
• Department: Business and Environment
• Course: BSEN 401
• Professor: William Huddleston

Document Summary

X = 0, => y = 150 2(0) = 150. Y = 0, => 0 = 150 2x => x = 150/2 = 75. This gives the horizontal intercept" of the diagram, i. e. , the amount of x when y = 0. These two pieces of information are sufficient to draw the production possibilities curve because the function is linear, i. e. , a straight line between two points. The slope of this line = rise/run = d y/d x = -150/75 = -2. The opportunity cost of a one unit increase in x is 2 units of y. Opportunity cost = - d x/d y = -(-2) = 2. One unit of y costs 75/150 = unit of x. We could also find this by expressing our equation in terms of x to get x = 75 y/2. This would also show that opportunity cost of y is x/2.