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 (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 (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