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Question 1 of 4

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You must read each slide, and complete any questions on the slide, in sequence.

Consider the following Budget Line. Harriet can choose to buy all plums, all pears, or certain combinations of both.

The horizontal axis shows the quantity of pears, while the vertical axis shows the quantity of plums. There is a downward sloping budget line that originates on the vertical axis at 200 and ends at 160 on the horizontal axis.

If Harriet chooses to buy 200 plums, she can also buy pears. (Enter a whole number without decimal places.)

Harriet uses all of her resources on plums. The point (0, 200) represents the place where the budget line meets the y-axis.
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The horizontal axis shows the quantity of pears, while the vertical axis shows the quantity of plums. There is a downward sloping budget line that originates on the vertical axis at 200 and ends at 160 on the horizontal axis.

If Harriet wishes to consume 80 pears, she can consume plums.

Here, Harriet spends half her resources on pears. The remaining resources can be spent on plums, allowing Harriet to buy half of the possible amount of plums. This is represented by the point (80, 100).
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The horizontal axis shows the quantity of pears, while the vertical axis shows the quantity of plums. There is a downward sloping budget line that originates on the vertical axis at 200 and ends at 160 on the horizontal axis.

The slope of this budget line is .

Slope equals rise/run. Here, the y-value falls by 200 as the x-value increases by 160. In this case, slope = -200/160 = -5/4. The sign is negative.
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The horizontal axis shows the quantity of pears, while the vertical axis shows the quantity of plums. There is a downward sloping budget line that originates on the vertical axis at 200 and ends at 160 on the horizontal axis.

What is Harriet’s opportunity cost of one plum?
The easiest way to see this is if Harriet goes from buying all pears to buying all plums, giving up 160 pears to gain 200 plums. Dividing 160 by 200, 0.8 pears = 1 plum.
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