Cups of Starbucks Coffee @ $3 each 10 A (0,10) 9 8 7 6 Budget constraint is $30 5 4 3 2 1 C (2,0) 1 2 CD’s @ $15 each What is the opportunity cost of gaining one CD if your current decision point is 10 cups of coffee?

Graphing opportunity costs in a two product world with a budget constraint Cups of Starbucks Coffee @ $3 each 10 A (0,10) 9 8 7 6 5 B (1,5) 4 3 2 1 C (2,0) 1 2 CD’s @ $15 each Moving from point B to point C means that the opportunity cost of gaining one more CD is __?__.

Cups of Starbucks Coffee @ $3 each 10 A (0,10) 9 8 Opportunity Cost = 7 6 5 B (1,5) 4 3 2 1 C (2,0) 1 2 CD’s @ $15 each Moving from point A to Point B means that the opportunity cost of gaining 1 CD is 5 cups of coffee Moving from point B to point C means that the opportunity cost of gaining one more CD is 5 more cups of coffee

Cups of Starbucks Coffee @ $3 each 10 A (0,10) 9 8 7 6 5 B (1,5) 4 3 2 1 2 CD’s @ $15 each Moving from point A to Point B means that the opportunity cost of gaining 1 CD is 5 cups of coffee Moving from point B to point C means that the opportunity cost of gaining one more CD is 5 more cups of coffee

Try it yourself Create a budget constraint and two product example. Hint: use prices that keep the math simple and the quantities small. (Example: $2 for one good, $6 for another good, $24 budget constraint.) Create a graph of your example. Label completely! Do not make your graph too small! Indicate the opportunity cost associated with moving from one point on the budget constraint line to another point. Put your name, period and date in the upper right hand corner. You will turn this in.