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Falguni
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#1
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i understand what opportunity cost is, but i dont know how to calculate it. could someone help me:

it takes 1hr to travel to a destination by plane and costs £100
it takes 5hr to travel to a destination by train and costs £60

which mode of transport has the lowest opportunity cost for someone who earns £5 per hour and can freely vary their hour of work?

its probably very simple but my brains not working at this time in the morning

thanxs in advance!
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AT82
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(Original post by Falguni)
i understand what opportunity cost is, but i dont know how to calculate it. could someone help me:

it takes 1hr to travel to a destination by plane and costs £100
it takes 5hr to travel to a destination by train and costs £60

which mode of transport has the lowest opportunity cost for someone who earns £5 per hour and can freely vary their hour of work?

its probably very simple but my brains not working at this time in the morning

thanxs in advance!
Well in terms of labour it will cost them £25 for the train and £5 for the plane. The train ticket option works out at £85 which is still cheaper so its this option the managers may choose.
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Falguni
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#3
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ok so u work out the cost of the hours lost in travelling in terms of hourly wage
and then you add that to the cost of the journey

is that what u mean?

thanks
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AT82
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(Original post by Falguni)
ok so u work out the cost of the hours lost in travelling in terms of hourly wage
and then you add that to the cost of the journey

is that what u mean?

thanks
Yep I am not 100% cetain that is what is meant but I think it must be. As managers need to work out the cost of oppurtunity and go with the cheapest option. The cheapest option is not always clear for exaple if this person earned £20 an hour then the plane would be much cheaper than the train.

In any business transport fares are fixed cost, the variable cost is labour.
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Falguni
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yeah im working them out and it looks right. i kinda knew what to do i just didnt know exactly how to put it so thanks for explaining it clearly
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viviki
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Wouldnt it include not only what the person earns an hour but the cost of how much revenue they bring to the firm per hour or am I reading too much into it.
eg. someone might only earn 5 per hour but they might be hired out at 25 per hour and therefore it would be cheaper for the firm to get them there earlier by plane. I dont actually know anything about this but that makes sense to me.
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Eru Iluvatar
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(Original post by Falguni)
i understand what opportunity cost is, but i dont know how to calculate it. could someone help me:

it takes 1hr to travel to a destination by plane and costs £100
it takes 5hr to travel to a destination by train and costs £60

which mode of transport has the lowest opportunity cost for someone who earns £5 per hour and can freely vary their hour of work?

its probably very simple but my brains not working at this time in the morning

thanxs in advance!
Can they work while travelling?
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AT82
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(Original post by viviki)
Wouldnt it include not only what the person earns an hour but the cost of how much revenue they bring to the firm per hour or am I reading too much into it.
eg. someone might only earn 5 per hour but they might be hired out at 25 per hour and therefore it would be cheaper for the firm to get them earlier by plane. I dont actually know anything about this but that makes sense to me.
Thats probably right but witht he statistics we were supplied its probably reading too much into it. It seems like a GCSE Business Studies question to me.
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Falguni
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well it is just a simple question i just couldnt remember how to do it because i was trying to read into it more. btw this is a introductory tutorial question for my microeconomics module as part of my degree - but we are starting at the basics as this is the first week.
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viviki
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(Original post by Falguni)
well it is just a simple question i just couldnt remember how to do it because i was trying to read into it more. btw this is a introductory tutorial question for my microeconomics module as part of my degree - but we are starting at the basics as this is the first week.
What uni?
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Falguni
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(Original post by viviki)
What uni?
kings college london - dont worry there IS harder stuff than this! lol
its just that we are starting at the beginning for those who havent taken economics or business studies but the pace picks up quickly
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viviki
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#12
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No it was just idle curiosity cos I saw London as your location and wondered if it was uni or home. I am so bored.
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Falguni
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#13
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(Original post by viviki)
No it was just idle curiosity cos I saw London as your location and wondered if it was uni or home. I am so bored.
ok
well its home and uni btw
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