What is the opportunity costs of Going to the movies instead of cleaning your room Eating a power bar when you are really hungry even though you know it is going to make your stomach hurt Fixing your car when instead of going on a vacation buying a coffee instead of gas

Chapter Two Apply the concept of opportunity cost to any economic choice Use a Production Possibilities Frontier to demonstrate increasing costs, opportunity cost, economic growth

Trade-Offs The choice between alternatives uses of a resource Two economic tools used to understand trade-offs Opportunity Cost Production Possibility Frontier

Opportunity Cost Real economic cost of a good or service produced measured by the value of the sacrificed alternative As more of a good is produced its opportunity cost rises “There’s no such thing as a free lunch”

Production Possibility Frontier A PPF illustrates the different maximum output combinations of goods/services than can be obtained from a fixed amount of resources

What does a PPF do? A PPF is a graph shows what the economy can produce with the present resources If the economy is at a point on the line, then it is making full use of its resources- efficient If the economy is not using all its resources efficiently then it will be at a point inside the boundary It is impossible to be at a point outside the PPF unless there is an increase in the factors of production

Option: Cars Planes A 150 0 B 125 5 C 80 9 D 36 16 E 0 25 Use a PPF chart to graph the information above

175 150 125 Cars 100 75 50 25 5 10 15 20 25 30 Planes

List resources scarce in this situation? About how many cars can be produced when five planes are made? About how many planes can be produced when 36 cars are produced? What is the opportunity cost of producing 150 cars? What is the opportunity cost of producing 5 planes?

Steel, Rubber, Plastic 125 16 25 planes 25 cars