Economics and Book Online

Topics: Economics, Great Depression, Price Pages: 4 (1059 words) Published: July 8, 2014
1. Liza needs to buy a textbook for the next economics class. The price at the college bookstore is $65. One online site offers it for $55 and another site, for $57. All prices include sales tax. The accompanying table indicates the typical shipping and handling charges for the textbook ordered online.

Shipping method| Delivery time| Charge|
Standard shipping| 3–7 days| $3.99|
Second-day air| 2 business days| $8.98|
Next-day air| 1 business day| $13.98|

a. What is the opportunity cost of buying online instead of at the bookstore? Note that if you buy the book online, you must wait to get it.

The opportunity cost of buying online instead of at the bookstore would be whatever is you would need to give up to get the book online. This would mean that the opportunity cost of buying online would include the sum of the shipping charge and the time that you would spend waiting on the book to arrive. If you buy the book at the store, you would be able to get the book the same day but it would also mean losing out on the possible savings that you would get if you bought it online.

b. Show the relevant choices for this student. What determines which of these options the student will choose?

So if Liza buys from the bookstore it would cost $65. If Liza decides to buy online from the first store the cost would vary. The price of the book from the first online store would be $55. Next day air to get the book in one business day would cost an additional $13.98. ($55 + $13.98 = $68.98). Her next choice would be to use 2 days shipping which is an $8.98 charge also from the first site. ($55 + $8.98 = $63.98). Next she could use 3-7 day shipping for a $3.99 shipping charge. ($55 + $3.99 = $58.99)

The next online site charged $57 for the book. If she chose 1 day shipping it would cost ($57 + $13.98 = $70.98), 2 day shipping would cost ($57 + $8.98 = $65.98) and 3-7 day shipping would cost ($57 + $3.99 = $60.99). So from looking at the...

References: Krugman, P. R., & Wells, R. (2005). Microeconomics. New York: Worth.
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