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Danielle is planning a cruise to Mexico and has a budget for new clothes of $300. The average price for a pair of shoes is $50 while the average price for a suit is $100. Danielle already has 4 pairs of shoes purchased for her cruise, what is the opportunity cost of buying two more pairs of shoes

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jepessoa

Answer:

1 suit

Explanation:

Danielle's consumption possibilities frontier is 6 pairs of new shoes or 3 suits.

  • Her opportunity cost of consuming one extra pair of shoes instead of one suit = $50 / $100 = 0.5 suit or half a suit
  • Her opportunity cost of consuming one suit instead of a pair of shoes = $100 / $50 = 2 pairs of shoes

If we want to calculate the opportunity cost of consuming 2 more pairs of shoes = 0.5 suit x 2 = 1 suit

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