![]() You're giving up berries thatĪre closer down the trees. Giving up the berries that are way up in the tree and Wants to die a little bit less and is maybe a The slightly faster rabbit- the slightly faster rabbit, who The slowest of the rabbits, the ones that aren'tĪfraid of humans, now you're going to have go get Now if you want toĢ rabbits a day, not only are you going to get ![]() Time to get those, literally, those slow and maybe less Time on a given day to get those really easy rabbits Who's been hanging out with me, he's been kind of asking for it. Sudden if you say, well, you know, that rabbit Hard to get berries and you're not going afterĮven easy to get rabbits. You have to get cut by thorns to get, the berries that you Getting, literally, the low hanging fruit,īerries that are further up the bush, the berries that To spend all of your time on the berries. Spears or your bow and arrow- you are not even goingĪfter that rabbit. Out with you, next to you, and it likes to play with your Not so quick witted rabbit who maybe likes to hang But to think about ourĮxample, as a hunter gatherer, we started here in Up in economic models? And just to be clear, it does ![]() We have to go after or the number of berries. Reality, the choices that we have to make, down Of different economic, and you can call thisĪn economic model. Increasing opportunity cost showing up in a lot But why would this make sense? Why is this idea of It on a unit basis, if you said every incrementalīerry or every incremental 100 berries we're going after,īut the numbers aren't as easy right over here. Opportunity cost as we increase the number of It's not always the case but it's the case in thisĮxample, increasing opportunity cost. Incremental rabbit I'm giving up more and more berries. Similar- the more rabbits that I'm goingĪfter, every time I try to go after another Sorry, not squirrels although I guess they're ![]() Up another 100 berries and go to not having And then finally, just toįeel some sense of completion, if I become a completeĬarnivore and if I want to get on average,ĥ rabbits a day, I'm going to have to give If I'm able to get 3 rabbits,Įvery day, on average then I'm only going to get 180īerries now instead of 240. What am I going to give up? Well, I'm going to We're really starting toīecome carnivores now. We're in Scenario D and we want even more rabbits. What will I give up? Well, now I am going What am I going to give up? Let me do that in What happens ifĪverage, eating 1 rabbit or finding 1 rabbit a day. So my opportunityį, of going after that 1 rabbit is 20 berries. One extra rabbit, I'm going to give up 20 berries. Then what's going to happen? Well, I'm going to have to stay That extra rabbit? If I go for that extra rabbit, Going to be the opportunity cost if I go for That you will see in many economic scenarios. Particular to this example, but it's a phenomenon Opportunity cost can change as we move from The curved ppf could represent some very different scenarios. OR maybe all rabbits are equally simple to catch but the berry bushes grow increasingly far from your home. Maybe all berries are equally easy to pick but the rabbits get increasingly crafty. It might be easier to think of time as an input, decreasing your marginal return on time is more natural than a decreasing return on 'not having berries', but notice nothing in this example says the 5th rabbit takes more time than the 4th, it just gives up more berries. Opportunity costs are always about something that didn't happen, returns are the production from an input, so you can see how a ppf is better suited to describing OC's than returns, because defining the 'input' to getting rabbits as 'not getting berries' is awkward. Rabbits go up in price = giving up berries gets you less and less per berry given up. The opportunity cost of something measures the price, whereas the return is measuring how much your payment of inputs is worth, so if the ppf is showing that rabbits get more expensive in terms of lost berries the more rabbits you have, that's equivalently a diminishing marginal return on the input (potential berries given up) and an increased opportunity cost on the output (expensive rabbits). They describe the same situation but are different statements, in the same way as asking are 'a is less than b' and 'b is greater than a' the same.
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