(individual) The graph in Figure 5-4 reproduces the graph used in Chapter 3 (Figure 3-3) to show how supply curves are based on opportunity cost curves. It adds a demand curve, showing how many hours of tutoring students would want to buy at various prices.
- What will students have to pay for an hour of tutoring in economics? How many hours will they buy?
It appears from the graph that they will purchase 18 hours of tutoring per day, at the price of $16 per hour.
- The opportunity cost to Marx of tutoring was given as $7.99—the wage he could get for fomenting revolutions. If you know this fact and consequently ask Marx to tutor you for $10 an hour, he will tell you that the opportunity cost to himself of tutoring you is $16. Is he right? Or is he just trying to exploit you?
We know he's qualified to tutor and to foment revolution. His opportunities in fomenting pay $7.99, but his opportunities in tutoring pay $16. He's not exploiting you.
- If Merrill Lynch offer Ricardo full-time work at $27.99 an hour, he will no longer be willing to supply 4 hours of tutoring per day for $10 an hour. What will happen to the price of tutoring service as a result?
Prices would rise to $20 per hour, and only 16 hours would be offered per week (down from 18).
- If the demand for tutoring service doubled (i.e., twice as many hours were demanded at each price as previously), what would happen to the price of tutoring services and to the number of hours supplied?
The demand curve would move to the right and slope less severely. The price would rise to $26 and 26 hours would be supplied, unless one of the suppliers is willing to supply partial hours of tutoring. In which case, the price would drop to $24.01, and 27.99 hours would be supplied.
- If demand tripled, what would be the price and number of hours supplied?
31 hours of tutoring would be provided, at a little bit over $30 an hour.