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Allocation of Time to Study Units

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Suppose, there is an allocation of time requires in each of the two units for the final exam. Considering the following figure, it is evident that, the requirement of time allocation of each of the study units is 100 hours. The total time available is also 100 hours. Each unit takes 100 hours time for completion. If allocation of 100 hours is only for a single unit, then there is no time available for other unit. Allocating 50 hours to each of the units completes half of the both units. Similarly, the following table shows different allocation of time on different units, partial completes the units.

Table 1: Allocation of hours in each unit

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Based on the above given table, there is a figure of production possibility frontier. In the horizontal axis, there is a percentage completion of the 2^ndunit and in the vertical axis; there is a measurement of percentage of completion of 1^st unit. The straight-line production possibility frontier shows constant slope means there is one to one correspondence between the two units. Therefore, to gain in one unit, there is a same amount of reduction in other units.

Figure 3: the production possibility frontier

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The concept of opportunity cost is the cost for forgone of the production of the next best alternatives. In this context, the production possibility frontier is a straight line. There is one to one correspondence between the substitutions of each unit. One hour extra allocation in the first unit, increase 10% of completion of first unit and 10% reduction in the second unit. The marginal rate of transformation is equals to 1. Therefore, achieving one unit of extra time to the first unit increases the completion of first unit and same amount of decrease in the second unit. The opportunity cost of each unit of study is same for each unit.

In this context, economic efficiency is the allocation efficiency. The time allocation to each of the units varies from one point to other. The perfectly negative sloping curve shows there is one to one correspondence between the two units. The opportunity costs for both the units are same. This means that allocation of time requires the same time allocation to the both units. In case of economic efficiency, there is a requirement of equal allocation of time to the both units. This ensures the economic efficiency.

The production possibility frontier shows the combination of time allocation to the each unit of study. In this study, according to the table number 1, the total time available to allocate is 100 hours. If the time for allocation increases, this increases the available time to allocate in both the units. Suppose, there are 200 hours available for allocate in both units. This rising in time, increases the allocation in both units and shift the curve outward. Similarly, if there is a reduction in time-availability for allocation, there are reductions in the allocation of time in both the units. This results in inward shift in the production possibility frontier.

Production Possibility Frontier and Opportunity Cost

After the release of the ‘Finding Nemo’ in 2003, there is a huge increase in demand for clownfish. In Australia, most of the Australian wants to have a clownfish as the pet. In this film, the character of clownfish is very charming, smart and charismatic. The clownfish is very colorful in the film. This makes clownfish very popular. These characteristics increase the demand for the fish rapidly in the market. However, the clownfish is not adequately available in the Australian market. Therefore, the supply of the fish is not enough to meet the increasing needs or demands for the clown fish. The excess demand relative to supply increases the price of this fish. Therefore, clown fish supplying firms makes a profit in this respect. The more profit results in more import of the clown fish in the market. This slows down the rapid increase in price (SBS. 2016).

Price elasticity of demand for clown fish is the percentage change in the demand for clown fish as a result, of percentage change in price of the clown fish. The observation is that, after the release of the film, demand for the clown fish increases at the existing price level.  Excess demand relative to supply pushes the price level up. This increasing price level does not result in decrease in the demand for the clown fish. In case of higher price, the demand for the clown fish does not change that much. Therefore, in case of higher price, the elasticity of the demand for the clown fish is inelastic. However, due to increase in the supply of the imported clown fish, there is a reduction in the price of clown fish. Reduction in the price of clown fish further increases the demand. Therefore, the demand curve for the clown fish is kinked- demand. In the section of the higher-price portion of the demand curve, curve in relatively inelastic and lower portion of demand curve is relatively more elastic that the higher part of it. The cross elasticity of demand for clown fish is highly elastic and effect is positive. In case of a rise of a price of other substitutable pets, there is a high rise of the demand for the clown fish. In the figure2, it is evident that, the higher portion of the demand curve is less elastic, whereas lower portion of the demand curve is relatively elastic. Therefore, there is kink in the existing price level. In this diagram P and Q represents the existing price and quantity respectively.

Figure 2: the kinked-demand curve

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After the release of ‘Finding Dory’ in 2016, the scientist and animal rights groups are thinking and worrying about the future of the blue tang fish species. These worries cause for the dangerous consequence of the clownfish around the world, after the release of ‘Finding Nemo’ in 2003. The blue tang fish is a rare species. There is a deficiency in the reserve of Dory. The depletion rate is greater than the replenish rate. After watching this film, the scientist and the animal right groups worries that, the demand for the blue tang fish may increase. This expected increase in demand for blue tang fish does not match with expected supply of blue tang fish. There is an expectation that people wants to have a blue tang fish as their pet. This increase in demand relative to supply increases the price of blue tang fish. The increase in the price of blue tang fish results in increase in profit. The higher rate of profit in the domestic market leads to increase the import of blue tang fish from the foreign market. Therefore, the increase in profit increases the supply of fish. However, the blue tang fish has a limited reserve. Therefore, only to achieve higher rate profit, there is an increase in the supply of blue tang fish in the market. This is a serious concern. This may has a negative impact on the reserve of the blue tang fish species. This is the main reason for the concern of the scientist and of the animal rights group.

Economic Efficiency

The preference for the small start up business is the business of restaurant. Australian really loves to have great variety of foods. They like to taste the different food around the world. There are several restaurant offers different foods to the Australian. However, the demand exceeds the supply of foods, which consists variety of taste characteristics. This increases the price of the restaurant-delivered food. As discussed, there is a figure 1, the vertical axis measures the price and horizontal axis measures the quantity. The excess demand relative to supply results in increase in price. The main motive of opening up a restaurant business is to supply the variety of cuisine at a low price. However, Australian is very health conscious. Therefore, the quality of food should ensure the health and hygiene factors. Therefore, there is a strong preference for opening up a restaurant (Australia.gov.au. 2016).

Figure 1: excess demand curve

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The menu could provide variety of foods to meets the needs of love and ideal for varieties of food in Australia. The potential customers of Australia love the meat pie. However, there are several classic and modern restaurants serving meat pie. They even try to serve and incorporate different variety and add different flavors to the original meat pie. Therefore, there is already a monopolistic competition. Therefore, product differentiation is very important in this business. There could be supply of meat-pie in this restaurant with a twist in taste.

To open meat-pie serving restaurant, the main inputs are labor, capital and land. However, the most important factors are the supply of meat, flour, spices, oven and most the cook and the service boys. This requires a sufficient amount of financial and physical capital. However, most important factor of production is the land. Without the land, the running of business is very difficult. The restaurant building is on the land. Therefore, the land is the most important factor of all the factors of production.

There is an economic cost associates with the restaurant business. The opportunity cost or the economic cost of restaurant business. These are the cost of land, cost of labor and cost of capital. To run a restaurant business, there is an urgent need to buy a land and set up a building on it is very important. This cost is irreversible and sunk cost. Once there is an investment on land, it is a fixed cost. To buy ingredients and spices of meat-pie, there is requirement of financial capital. Physical and financial capital helps to install various equipments for production of meat-pie and serving meat-pie in the restaurant. There cost of table, chairs, lights, microwave and AC etc. These physical assets are in the long-run cost. There are most requirements of cooks and service boys in the making of meat-pie. Therefore, there is cost of labors, land and capital. Here, land and physical capital is a fixed cost and labor and financial cost. All these factors, other than cook, cooking apparatus and restaurant boys are very important other start up business. However, the restaurant business gives the income from the very first day of business, this does not ensure by all other start up businesses. Therefore, there are some next best alternative uses of these resources. Therefore, the economic cost of a restaurant business is very high.

Explicit cost is the payment directly made to the units of inputs for function a business or production process. These payments are for employed labor, capital and land or any other managerial experiences. Implicit cost arises when there is no such payment for the any services used in production process. According to the discussion, the above-mentioned costs are explicit costs. Because, all the cost arises for the payment of above-mentioned three factors of production are the explicit cost. However, if the entrepreneur of the restaurant involves himself in the accounts or other functions like cooking or other, then this cost is implicit cost.

If, there is a perfect competition in the restaurant in the market, then there are no needs for differentiated meat-pie. All the restaurants supply the same quality homogeneous product. Therefore, the determination of price and quantity is depends on the interaction of supply and demand for the meat-pie. Therefore, in a perfectly competitive market, market decides the equilibrium price and quantity.

Reference:

Australia.gov.au. (2016). Food industry | australia.gov.au. [online] Available at: https://www.australia.gov.au/information-and-services/business-and-industry/food-industry [Accessed 18 Aug. 2016].

SBS. (2016). SBS - Special Broadcasting Service. [online] Available at: https://www.sbs.com.au [Accessed 17 Aug. 2016].