Problem 3 A consultant works for \(\$ 200\... [FREE SOLUTION]

Chapter 1: Problem 3

A consultant works for $\$ 200$ per hour. She likes to eat vegetables, but is not very good at growing them. Why does it make more economic sense for her to spend her time at the consulting job and shop for her vegetables?

Short Answer

Expert verified

Given that the consultant earns $\$200$ per hour and it takes T hours to grow enough vegetables for her personal consumption, her opportunity cost for growing vegetables is $200 \times T$. If the cost of buying those vegetables at the store is V dollars, it is more economical for the consultant to spend her time working and buying vegetables if $200 \times T > V$. This is because her opportunity cost of growing them is higher than the cost of purchasing them.

Step by step solution

1. Calculate the opportunity cost of growing vegetables

To calculate the opportunity cost of growing vegetables, we need to know how much time it would take to grow vegetables and the amount of money the consultant could earn during that time. Let's assume it takes T hours to grow enough vegetables for her personal consumption. In that time, the consultant could earn $200脳T if she were working.

2. Calculate the cost of buying vegetables

Find the cost of buying the same amount of vegetables the consultant would have grown. Let's assume the cost of buying the vegetables from the store is V dollars.

3. Compare the opportunity cost of growing vegetables to the cost of buying vegetables

Now compare the opportunity cost of growing vegetables (200脳T) to the cost of buying the vegetables (V). If the opportunity cost of growing vegetables is greater than the cost of buying vegetables, it makes more economic sense for the consultant to work and buy her vegetables from the store. In other words, if: 200脳T > V Then, it is more economical for the consultant to spend her time working and shopping for her vegetables instead of growing them.