Transcript C1S3: Economic Choices and Decision Making

C1S3: Economic Choices and Decision
Making
• Main Idea:
– Trade-offs are present whenever choices are
made.
C1S3: Economic Choices and Decision
Making
• Key Terms:
– Trade-off
– Opportunity cost
– Production possibilities frontier
– Cost-benefit analysis
– Free enterprise economy
– Standard of living
• (a)What is Calvin doing when his father asks
him to do a chore? (b)What other activity
might Calvin have been planning to engage in?
• (a)What are Calvin’s trade-offs when his father
asks him to do a chore? (b)What will Calvin
get if he does the chore?
•How do the trade-offs for choosing to
do the chore change after Calvin
demands twenty-five dollars for it?
• (a) How else might Calvin’s father have
responded to the demand for twenty-five
dollars? (b) How would this have changed the
outcome?
• Why do you think Calvin’s father says he is a
“smart kid”?
Continued on next slide.
C1S3: Economic Choices and Decision
Making
• Trade-Offs and Opportunity Cost
– Trade-Offs
• Part of analyzing an economic problem
• People will look at possible alternatives to a decision
C1S3: Economic Choices and Decision
Making
• Trade-Offs and Opportunity Cost
– Opportunity Cost
• The next best alternative that you give up
• Can be measured in more than money
C1S3: Economic Choices and Decision
Making
• Production Possibilities
– How economists illustrate opportunity cost
– Identify possible alternatives
C1S3: Economic Choices and Decision
Making
• Production Possibilities
– Fully Employed Resources
• All points ON the curve represent maximum output
• Point ‘d’ cannot be
reached
C1S3: Economic Choices and Decision
Making
• Production Possibilities
– Opportunity Cost
• If you are producing at one point on the curve, and
wish to move to
another, it will cost
what you have given
up
C1S3: Economic Choices and Decision
Making
• Production Possibilities
– Idle Resources
• Point ‘e’ represents inefficient work
• Not all resources are being employed
C1S3: Economic Choices and Decision
Making
• Production Possibilities
– Economic Growth
• If population, or any other input, grows, it will result in
expansion of the ppf
C1S3: Economic Choices and Decision
Making
• Complete “Reviewing the Facts” 1-12 on page
28 on a separate sheet of paper to hand in