1 Economic Choices To choose or not to choose

2 Economic Choices Why do we have to make choices?  because of scarcity, we can not have everything we want

3 Economic Choices What makes choosing difficult?  some of our choices are in direct conflict with each other -ex. society wants to drive big SUV’s but they also want to use less gas

4 Economic Choices What are trade-offs?  the choice between alternative uses for a given quantity of a resource  ex. Friday night we want to go to the Jamboree and go to a concert. They are both at the same time. How do we decide?

5 Economic Choices What is opportunity Cost?  real economic cost of a good or service produced measured by the value of the sacrificed alternative  this is the idea of comparing the two choices to find out what is lost and what is gained

6 Economic Choices What is opportunity Cost?  we often do this at a subconscious level  ex. we do not stand in the cafeteria and right all the pros and cons of the burgers or the salads

7 Economic Choices What are the three basic economic questions? 1. What to produce? this is done in the free market this determines what mix of goods and services will be allocated

8 Economic Choices 1) What to produce? (continued) ex. The milk vending machine -Chocolate

9 Economic Choices 2) How to produce? what method of production -does it need to be fast/or mass produced/does it need to be a very high quality -what combination of resources are needed -how will the infrastructure be used -the stock of an economy’s capital

10 Economic Choices 3)For Whom to produce?  This determines how much of what is produced -ex. Porsche Carrera GT $440,000

11 Economic Choices What role does culture play?  This determines what is important or valued by the society -ex. Clean air

12 What are society’s economic goals? 1) Efficiency -getting the most out of our resources -using the least amount of resources to make the most -use limited resources for the most important purposes

13 1) Efficiency (continued) - By improving technology we should be increasing efficiency -ex. Japan following World War II dumped all of their technology development into civilian areas. They became a world leader in efficiency.

14 What are society’s economic goals? 2)Stability  The avoidance of rapid changes in the general price level of goods or services  This should reflect production costs and demand for the item

15 What are society’s economic goals? 2)Stability (Continued)  Inflation, the quick continuous rise of the general price level, destroys price stability  This is caused by sudden changes in the country or world

16 What are society’s economic goals? 3) Full employment  This is nearly everyone that wants to work has a job  In practice an unemployment rate of around 4-5 % is considered full employment

17 What are society’s economic goals? 4) Growth  all the other factors contribute to growth  this is an increase in the production capacity of the economy

18 What are society’s economic goals? 4) Growth There are many theories on how to facilitate growth 1. decreasing the deficit 2. increasing tax breaks for new businesses 3. improving the countries infrastructure 4. more government spending