1 Essential Question: Define the term Trade Off, Explain what an Opportunity cost is and why it is so important to consider when allocating resources; and describe what a production possibility curve is and what it can show. SECTION 3 Opportunity Costs

2 What are Trade-Offs Trade-offs are the alternative choices people face in making an economic decision. Ultimately, once an Economic Actor makes a decision about how to utilize a scarce resource, the options that they did NOT choose are all trade-offs Economic Choices and Decision Making SECTION 3

3 Decision Making Grid (Do Not Copy) 1.) Copy down the table on the whiteboard 2.) In each of the three categories, give each restaurant a score from 1-5 with 1 being the worst and 5 being the best. No two restaurants can have the same score!!! 3.) Add up the scores from each category and write the total in the 4 th column 4.) If absent, copy chart from a neigbor’s notes Economic Choices and Decision Making SECTION 3

4 Opportunity Cost Opportunity Cost is expressed in the book as the second best option not selected. Example: If McDonald's is your first choice, and Burger King were your second choice; the Opportunity Cost of getting McDonald’s with your resource (money) is giving up the opportunity to get Burger King Economic Choices and Decision Making SECTION 3

5 Opportunity Cost (Cont.) O.C. is a way of describing the careful thoughts that go into making choices that are impacted by Scarcity. You need to look at resources used, and potential consequences suffered (even if in the future). Economic Choices and Decision Making SECTION 3

6 Production Possibility Curve: A graph showing the combinations of products that a company can use with the same amount of a given resource (helps company answer 3 Q’s) PPC’s make two important assumptions Technology and Resource quantity don’t change Resources are being used efficiently (not wasted) Future PPC’s can change if A.) Technology changes or B.) If factors of production (resources) change. SECTION 3 Opportunity Costs