Opportunity cost DSE 答題技巧
做Econ past paper時遇到opportunity cost的題目經常無從入手？
Type 1: Opportunity cost (full cost)
-Full cost = money cost + non-money cost (e.g., Time cost)
-Although the money cost of X is higher than Y, the non-money cost (e.g., Time cost) of X may be lower than that of Y.
-If the time cost saved outweighs the extra money cost, then the cost of X can be lower.
Although air ticket fares and hotel rates are usually higher during holiday periods, many people still travel abroad. Explain, in terms of opportunity cost, why it is not necessarily more expensive for travellers to travel abroad during holiday periods than non-holiday periods. (3 marks)
Full cost = money cost + non-money cost (1)
During holiday periods, although the monetary cost of travelling abroad (including air ticket fares and hotel expenses) is usually higher than that during non-holiday periods, the time cost (eg. Income foregone) may be a lot lower. (1)
If the time-cost saved outweighs the extra monetary cost, then in terms of full cost travelling abroad during holiday periods would be less expensive. (1)
Type 2: Opportunity cost (remain unchanged or not)
If remains unchanged:
-_____only increases/decreases the value of _____which does not affect the highest valued option forgone.
If changes (increase/decrease)
- (highest valued option forgone changes)
-_____would increase/decrease the money/non-money cost of the highest valued option forgone and thus the full cost i.e. Opportunity cost would increase/decrease.
-The value of the highest valued option forgone would increase/decrease.
- (other option changes)
-_____ may increase the value of the 3rd option to a level higher than the value of the 2nd option
-the opportunity cost would thus increase as the value of the highest valued option forgone increases.
Serine is a university graduate who is seeking a job. She has several options and her order of preference is shown below:
First preference: to work for the government as an administrative officer
Second preference: a work in an accounting firm as a trainee
Third preference: to continue to seek a job without accepting any offers
Analyse whether Serine’s opportunity cost of choosing to work as an administrative officer will necessarily remain unchanged if
a)the government reduces the starting salary of administrative officers. (2 marks)
b)the government provides unemployment benefits for all graduates seeking jobs. (3 marks)
Yes, because (1)
the reduction in the starting salary of administrative officers would only decreases the value of Serine’s chosen option without affecting her highest valued option forgone. (1)
No, because (1)
government provision of unemployment benefits may increase the value of Serine’s 3rd option to a level higher than that of the 2nd option. (1)
the cost of choosing to work as an administrative officer may now change from the value of the 2nd option to that of the 3rd option. (1)
Type 3: Opportunity cost (same time cost different full cost)
-People have different (highest valued) alternative uses of time, their time cost would not be the same. (Therefore, their full cost would not be the same.)
The following is an extract from a local newspaper article.
The MTR corporation raised the railway fares by 5.4% in 2012. This increase was based on the Fare Adjustment Mechanism set by the government. To respond to the discontent of the public over the fare increase, the Corporation introduced a concessionary measure ‘’Ride 10 Get 1 Free’’.
c)It was observed that there were queues of passengers redeeming the free tickets at customer service counters in MTR station. Suppose the waiting time is the same for these passengers, is the cost of redeeming the free tickets necessarily the same to these passengers? Explain. (3 marks)
No, because (1)
people have different alternative uses of time, their time cots will not be the same.(2)
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DSE Econ 文章系列
- 經濟表現的量度 Measure of economic performance
- 國民收入決定及價格水平 National income determination and price level
- 貨幣與銀行 Money and Banking
- 宏觀經濟問題和政策 Macroeconomic Problems and policies
- 國際貿易和金融 International Trade and Finance