At A, where almost all resources are being used to produce education, an added 20 units of housing can be produced by giving up fewer than 5 units of education. At C, to produce another 20 units of housing 23 units of education must be given up. The opportunity cost of housing in terms of education is about 5 times greater at C than at A.
At A everyone is teaching, even those who are skilled carpenters.
If we want more housing it makes sense to take units out of education first. Moving from C to D means using skilled teachers as builders.
Copyright © 1995-2004 OnLineTexts.com - All Rights Reserved