Warm Up Question: What is the purpose of economic models? NOTEBOOKS OUT TODAY’S DATE Warm Up Question: What is the purpose of economic models?

Making Choices 6 5 Hours Spent Working 4 3 2 1 1 2 3 4 5 6 $120 F 5 $100 D- Hours Spent Working 4 $80 D 3 $60 C $40 2 B 1 $20 A $0 A+ 1 2 3 4 5 6 Hours Spent Studying

Making Choices POSSIBLE CHOICE, 6 $120 POSSIBLE CHOICE, NOT PRODUCTIVE F IMPOSSIBLE NOT ENOUGH TIME 5 $100 D- Hours Spent Working 4 $80 D FULL PRODUCTIVITY, meaning the maximum way time can be spent. 3 $60 C $40 2 B 1 $20 A $0 A+ 1 2 3 4 5 6 Hours Spent Studying

Making Choices This model illustrates choices!! It shows how a student can choose to spend his/her time between two different activities. 6 $120 F 5 $100 D- For example, choosing a B in economics is a trade off, but the opportunity cost is: Hours Spent Working 4 $80 D 3 $60 C It shows choices (trade offs) and sacrifices (opportunity costs) of that decision. Giving up an A and A+, But also giving up $80!! $40 2 B 1 $20 A $0 A+ 1 2 3 4 5 6 Hours Spent Studying

Trade Offs & Opportunity Costs (CHOICE) Opportunity Costs (SACRIFICE) $80 A C $120 A+ $100 Recopy the chart to the right and determine the opportunity costs of each of the following decisions. $40 and a C, B, A or A+ $100 and an A+ $60 and a B, A or A+ Any grade over F $120 $20 any grade over D-

What is the difference between a trade-off and an opportunity cost? Quiz Tomorrow!!! Highlighter Warm Up Question: What is the difference between a trade-off and an opportunity cost?

THE PRODUCTION POSSIBILITIES FRONTIER: And this model is… THE PRODUCTION POSSIBILITIES FRONTIER: PRODUCTION = POSSIBILITIES = FRONTIER = An ECONOMIC MODEL showing the maximum COMBINATIONS of g&s an economy can PRODUCE when all resources are FULLY EFFICIENT.

Drawing your own. On any given day we can produce either 60 televisions or 600 pencils, as long as our resources (land, labor & capital are fully employed). Create the following production possibilities frontier: Televisions Pencils (horizontal) (vertical) 600 10 500 20 400 30 300 40 200 50 100 60

Producing TVs & Pencils 600 Frontier: represents uncharted terrain; impossible today, but possible in the future with more resources (expand firm)!! Possible combination of TVs and pencils, but wasted resources!! BAD  500 # of Pencils 400 Full Productivity 300 200 100 10 20 30 40 50 60 # of Televisions

Final Thoughts: PRODUCTIVITY: the degree to which productive RESOURCES (factors) are used EFFICIENTLY (without waste). What would cause a business to be not productive? For each factor below, list three reasons why that resource can fail any business: LAND LABOR CAPITAL GDS.