Chapter 1 Section 2

Section 2 – tradeoffs Tradeoffs – sacrificing one good or service to purchase another. Individuals, families, businesses, and societies are forced to make trade-offs every time they use their resources in one way and not another. Opportunity Costs – value of the next best alternative given up for the alternative that was chosen. Other activities you could have chosen to do during that time.

Opportunity costs Examples: Could have slept in this morning if you had not gone to school. Give up 4 years of income if you go to college. Congress spent $700 million on stimulus. Could have spent it to reduce debt. Pg. 13 Global Economy story. *You have opportunity costs every time you make a choice.

Production possibility Production possibility curve – graph showing the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time. Look at graph on page 15. Helps businesses determine how much of each items to produce, revealing the trade-offs and opportunity costs involved in each decision.

Factors of production The Classic Example – Military Defense vs. Civilian goods.

Create a poster like the one below illustrating an opportunity cost you may make in your life.