CCN 2002 Individual Assignment 1
(Topic 1 – 4) (Suggested Solution)
CCN 2002
Introduction to Economics
2017-18 Semester 1
Q1: Suggested Solution
(a) Scarcity is the condition that arises because resources are limited relative to unlimited human
wants.
Time as a resource is limited
Wants of Tommy – playing video game, earning from part-time job and attending the revision
class – are unlimited.
(b) Opportunity cost is the highest-valued option forgone for an act or a decision.
If Tommy goes to work from 4:30pm to 8:30pm next Friday, his opportunity cost is the better
performance in the final exam after attending the revision class at 4:30pm-6:30pm.
Then, Tommy’s opportunity cost of going to work is the fun obtained from playing video game at
home at 6:30pm-8:30pm.
(c) To make a rational decision, you need to take an action for which marginal benefit exceeds or
equals marginal cost.
The marginal benefit of attending the revision class is the expected better performance in the final
exam.
The marginal cost of attending the revision class is the income forgone from the part-time job
If the marginal cost of attending the revision class is higher than its marginal benefit, it is a rational
decision for Tommy not to attend the revision class.
