Today’s DOA Be prepared to answer the following questions: What is the difference between a good and a service? Why do you think some goods are more valuable than others? What did Adam Smith mean by the paradox of value? How is value determined?

Introduction to Economics Opportunity Cost

What is Economics? REMEMBER… Economics is the study of how people try satisfy their own needs/wants through the careful use of scarce resources.

Scarcity of Resources REMEMBER… Condition that results from not having enough resources to produce all the things you would like to have.

Factors of Production REMEMBER… Resources required to produce things we would like to have. Production refers to the process of creating goods/services. There are 4 factors of production: Land Capital Labor Entrepreneurs

Economics as a Social Science REMEMBER… Economics studies the behavior of people as they deal with basic issues. There are four key elements to the study of Economics: Description Analysis Explanation Prediction

Consumers REMEMBER… Person or individuals who use goods/services to satisfy their wants/needs. Discussed: Goods and Services Wealth Value and Utility Paradox of Value

Opportunity Cost Today’s lesson will focus on the following: Defining Opportunity Cost Rational Decisions Cost vs. Benefit Decision Making

Opportunity Cost Defined as: The cost of the next best alternative use of money, time, or resources when one choice is made rather than another.

Opportunity Cost Opportunity Cost has the following: The chance to do something Is of value Value of the next best alternative Forces us to evaluate each alternative

Thinking Rationally What is a rational decision? What is a decision? What does rational mean? List an example of a rational decision you made this past weekend.

Cost vs. Benefit When we are making decisions we look at the cost versus the benefit of that decision. Weigh the cost. What are the cost of making one decision over another? Look at the benefit. What are the benefits of making one decision over another?

Decision Making Grid Choices Criteria Rational Decision? ----------------- Less than $100 Durable? Anytime Use or One Time Use? Future Expenses Involved Pair of Jeans YES YES Anytime NO YES Tickets NO NO One Time YES NO

Today’s DOA Complete the following grid. Choices Criteria Rational Decision? ----------------- Less than… $______ Durable? Anytime Use or One Time Use? Future Expenses Involved