Trades Offs, Choices, Opportunity Costs Marginal Utility Your group is building a new zoo. You have to decide what animals to have. Space is limited. You get 25 acres. Take 8-10 minutes to make your selections, based on the next slide.

Zoo Choices – 25 acres total! Lion - 2 acres Turkey - 1/10 acre Giraffe -1 acre Seal - 1/2 acre Camel - 1/2 acre Cheetah - 1 acre Cow - 1/3 acre Monkey - 1/2 acre Asian Elephant - 1 acre African Elephant - 1.5 acres Reptile House - 5 acres Hammerhead Shark - 1/2 acre Kangaroo - 1/2 acre Tiger - 1 acre Whales - 3 acres House of Birds - 5 acres *Numbers are acres required for ONE animal (hint: they don’t like being alone!) [If you had 2 of each, it would take over 34 acres–so you will have to make choices.]

25 ACRES Lion - 2 acres; Turkey - 1/10 acre; Giraffe -1 acre; Seal - 1/2 acre; Camel - 1/2 acre; Cheetah - 1 acre; Cow - 1/3 acre; Monkey - 1/2 acre; Asian Elephant - 1 acre; African Elephant - 1.5 acres; Reptile House - 5 acres; Hammerhead Shark - ½ acre; Kangaroo - 1/2 acre; Tiger - 1 acre; Whales - 3 acres; House of Birds - 5 acres. *Numbers are acres required for ONE animal (hint: they don’t like being alone!) [If you had 2 of each, it would take over 34 acres – so you will have to make choices.]

25 ACRES Two camels Two seals To get you started here are some examples of what you might do! Two monkeys This would have taken care of 7 of the 25 acres. 18 more to go! Two Asian elephants Two camels Remember that 2 of each helps future zoo stock. Two seals Two tigers

3. Why didn't your group put a turkey in your zoo? Questions 1. Why didn't your group put one of every animal in the zoo?  Scarcity 2. We had a trade off problem. If we wanted more on one animal we had to give up more of another animal. 3. Why didn't your group put a turkey in your zoo?  Benefits vs. costs (turkeys, like cows, are too common) 4. Why would be an economic problems with a zoo with only monkeys?  Diminishing[less] marginal[extra] utility[satisfaction] 5. Why would your group likely choose an Asian elephant and not an African elephant? Benefits vs. costs (the Asian Elephant takes less land)

Law Of Diminishing Marginal Utility A law of economics stating that as a person increases consumption of a product - while keeping consumption of other products constant - there is a decline in the marginal (incremental) utility (satisfaction) that person derives from consuming each additional unit of that product.

This is the premise on which buffet-style restaurants operate This is the premise on which buffet-style restaurants operate. They entice you with "all you can eat," all the while knowing each additional plate of food provides less utility than the one before. And despite their enticement, most people will eat only until the utility they derive from additional food is slightly lower than the original.

For example, say you go to a buffet and the first plate of food you eat is very good. On a scale of ten you would give it a ten. Now your hunger has been somewhat tamed, but you get another full plate of food. Since you're not as hungry, your enjoyment rates at a seven at best. Most people would stop before their utility drops even more, but say you go back to eat a third full plate of food and your utility drops even more to a three. If you kept eating, you would eventually reach a point at which your eating makes you sick, providing dissatisfaction, or 'dis-utility'.

Questions [continued] 6. What was the last animal to make the cut for your zoo?  Marginal Analysis 7. What was the animal that just missed the cut for your zoo?  That animal is the “opportunity cost” [“opportunity lost”] 8. What animal did everyone in your group agree to include ___?  9. Would everyone in your group have made the same choices if they did the zoo alone?  Individual benefits vs. social benefits

Marginal Analysis An examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions.

For example, if you already exercise five times a week and are thinking about adding a sixth day, you would use marginal analysis to determine whether the benefits of the sixth day, such as additional calories burned, endurance gained and muscle built, would be worth the costs of the sixth day, such as giving up sleeping in on Saturdays, having less energy to do your other weekend activities, and increasing your risk of injury.