1 Essential Question: Explain the difference between trade-offs and opportunity cost and identify what a production possibility curve is and what is can illustrate. SECTION 3 Opportunity Costs

2 Trade-Offs and Opportunity Cost Trade-offs are the alternative choices people face in making an economic decision. A decision making grid can list the advantages and disadvantages of each choice Economic Choices and Decision Making SECTION 3

3 Decision Making Grid (Do Not Copy) 1.) Copy the grid that appears on the whiteboard to the left of class in your notes! 2.) Fill in each of the five missing restaurants 3.) For each restaurants, give it a score from 1-5 in each of the 3 categories. 4.) Add up the scores from each category and write the total in the 4 th column Economic Choices and Decision Making SECTION 3

4 Trade-Offs and Opportunity Cost (continued) Opportunity Cost is the cost of the next best alternative among a person’s choices. O.C. includes all of the resources consumed (or not consumed), benefits lost/gain, or consequences suffered from choosing something over another. In other words, choose wisely Economic Choices and Decision Making SECTION 3

5 Opportunity Cost in detail If you narrowed your choice between McD’s and B.K. and chose McD’s, what are the consequences of this decision? More money spent? Less time since it’s further away? Poorer Selection of food? The point is when making choices, consider all of the things that make up the opportunity cost so that you use ALL of your resources wisely Economic Choices and Decision Making SECTION 3

6 Assumptions involved in creating a production possibilities curve: that the amount of available resources and technology will not change during the time being studied that all the resources being used are utilized as efficiently as possible SECTION 3 Opportunity Costs

7 Reasons future production possibilities might differ from current production possibilities: changes in technology changes in the factors of production SECTION 3 Opportunity Costs