Trade-offs and Opportunity Costs Chapter 1.2 Trade-offs and Opportunity Costs

Review What is Scarcity? Trying to meet unlimited wants with limited resources Because we have scarcity, we have to make choices

Choices and Trade-offs The economic term for choices is Trade-off A trade-off is a choice that involves giving up some of one thing to have more of another Trade-off is sacrificing one good or service to purchase or produce another Trade-offs are important because of scarcity Trade-offs determine how we will use our scarce resources Trade-offs result in opportunity costs

Opportunity Costs Opportunity costs definitions The results of trade-offs we make because of scarcity The next best alternative use of your resources Opportunity costs are opportunities lost

Production Possibility Curves The maximum combinations of things that can be produced from resources Show the result of our trade-off Classic example is trade-off between guns and butter Zone of Terror