You are to choose TWO goods/services or resources that you produce? Next identif

Question

You are to choose TWO goods/services or resources that you produce?

Next identify the unit of measure you will use to count your output (you cannot use time or money since you do not produce either

Choose the fixed time period in which you measure your output (must be in HOURS):

Identify the maximum output of Good1 one and then good 2 if you were to devote all the time period and all your resources to each respective good.

Finally find the relative price of good 1 and good 2 (Set the max production equal to each other and then solve for 1 unit of good 1; then solve for 1 unit of good 2)

Explanation / Answer

I produce 2 goods: Greeting cards (C) and Gift tags (T).

I measure them by the number of pieces I can make in 1 hour.

In 1 hour, I can make either 5 greeting cards or 20 gift tags.

So, if I devote entire hour to make only cards, I can make 5 cards.

If I devote the entire hour to make only tags, I can make 20 tags.

So, relative price of 1 greeting card = 20 tags / 5 cards = 4 gift tags.

Relative price of 1 gift tag = 5 cards / 20 tags = 0.25 greeting card.

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