Debbie, a popular wedding photographer, is able to photograph a wedding every Saturday of the year. She charges couples $4,000 for a complete set of photographs that cost her $2,200 to print and develop. Suppose that, on one Saturday, Debbie photographs her niece's wedding without charge, but her niece insists on paying Debbie $2,200 to cover her printing and developing costs. What is Debbie's economic cost of photographing her niece's wedding?
Question
Debbie, a popular wedding photographer, is able to photograph a wedding every Saturday of the year. She charges couples 2,200 to print and develop. Suppose that, on one Saturday, Debbie photographs her niece's wedding without charge, but her niece insists on paying Debbie $2,200 to cover her printing and developing costs. What is Debbie's economic cost of photographing her niece's wedding?
Solution
To calculate Debbie's economic cost of photographing her niece's wedding, we need to consider both her explicit and implicit costs.
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Explicit costs: These are the actual out-of-pocket expenses for printing and developing the photographs. In this case, it's $2,200, which Debbie's niece insists on paying.
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Implicit costs: These are the opportunity costs of using resources in one way rather than in their next best use. In this case, it's the income Debbie could have earned if she had photographed a wedding for a paying customer. Since she charges $4,000 for a wedding, this is her implicit cost.
So, Debbie's economic cost of photographing her niece's wedding is the sum of her explicit and implicit costs, which is 4,000 = $6,200.
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