Opportunity Cost The opportunity cost of a choice is the value of the next- best alternative given up when that choice is made. Think of the example of coming to school. The choice to cut class is an option but the opportunity cost is too high for most students.

Opportunity Cost Simulation

Economists use modeling to simplify reality. Economics Models Economists use modeling to simplify reality. Models help to focus on selected aspects of the real world by stripping away nonessential details. By leaving out some details, maps and other models make it easier to find what you’re looking for.

Uses of models include: Economics Models Uses of models include: Describing relationships Forecasting economic activity Proposing economic policy Presenting reasoned arguments to justify policy Planning and allocation Commonly described as establishing argumentative framework for applying logic and mathematics By leaving out some details, maps and other models make it easier to find what you’re looking for.

Creating Economic Models

The Production Possibilities Frontier A production possibilities frontier, or PPF, is a curve that shows the maximum quantity of one good that can be produced for each possible quantity of another good produced. Have students explain the difference between point G and H. Then ask what the difference between C and D are on the curve.

Efficiency and Growth An economy is efficient if there is no opportunity to make someone better off without making anyone else worse off. Explain how a point change from A to B to C to D to E to F are all efficient and do not make people better off or worse off but show a choice society is making.

Opportunity Costs for Society Make sure the students understand that points on the curve represent efficiency.

Opportunity Costs for Society The law of increasing opportunity cost states that the opportunity cost of a good rises as more of the good is produced. Write on the board the X & Y values for points B, C, and D to show INCREASING opportunity costs.

Efficiency and Growth Economic growth is an increase in the ability to produce goods and services over time. PPF moves due to more resources, more training for labor, greater productivity, or even trade with other countries. The term is scarcity. We have limited resources to add to our capacity to produce.

Microeconomics Macroeconomics The study of how people make decisions and how those decisions affect others In the economy. Microeconomics Example Topics: - Profits - Markets - Pollution The study of the economy as a whole. Macroeconomics Example Topics: - Inflation - Interest rates - Government spending These notes are from the teaching tip in the TE of the text. It would be good to repeat the analogy for reinforcement. The individual trees in a forest are the “players” in the economy—households, businesses, and the government. These players interact and produce a set of goods and services. If they excel, the forest thrives. The set of goods and service is the forest. We look at the forest as one entity. We study the effects of weather, fire, and other elements  that can influence the forest overall. Macroeconomics studies the economy as a whole, while microeconomics studies the participating players and how they interact.  

Positive Economics Normative Economics Positive economics is the study of what the world is like and why it works the way it does. It is about facts and cause- and- effect relationships. Positive questions include: • How many teenagers live in poverty? • Do people buy more or less Coke when their incomes increase? Normative economics is the study of the way things should be rather than the way things are. Normative economics brings opinions and ideals into the process of answering questions. Normative questions include: • Should our country do more to help the poor? • Should college athletes be paid to perform? Use the Activity Learning TE activity before or after this slide show to reinforce this concepts