Question

If a family spends its entire budget in a given time frame, the family can afford either 80 cans of beans or 35 frozen pizzas. Assuming the family spends its entire budget on just these two goods, what is the opportunity cost of one can of beans in the time frame

Answer 1

Answer:

7/16

Explanation:

Opportunity cost is the cost of the alternative forgone. It is also called the real cost. It is a concept in economics developed due to the fact that wants are unlimited but the resources available to meet the wants are limited. Hence a scale of preference would be drawn up for the wants in order of importance.

If the family can afford either 80 cans of beans or 35 frozen pizzas, the cost of a can of beans in terms of frozen pizza is 35/80 frozen pizza while the cost of a unit of frozen pizza in terms of beans is 80/35.

As such, the opportunity cost of one can of beans in terms of frozen pizza is 35/80 which is 7/16 in the lowest term