Opportunity Costs

Things to doCan I afford this? Will this be OK with my parental units? Will this benefit me for the long term?

By considering the trade-offs and Opportunity costs.  Trade-Off = One good is sacrificed for another.  Opportunity Cost = the cost of the trade-off. (the value of the next best alternative that is given up to obtain the preferred item)

However when it comes to Economics it is much more complicated: For Example: Resources are used by a factory to manufacture autos Trade-off is not just between auto factory and one other use of the resources  All of the workers, equipment, materials, and financial input could be used to build any combination of homes, offices, schools, shopping centers, etc.   Could be used for something else entirely – money could have been invested else where. Any of these other choices are trade-offs, but only the next best choice (your decision) is considered the opportunity cost.

Through developing and analyzing Production Possibility Curves (PPC’s).  A Production Possibilities Curve – shows all of the possible combinations of two goods or services that can be produced within a stated time period, given two important assumptions: 1. Amount of available resources and technology will not change during time period studied 2. All natural, human, and capital resources are being used in the most efficient manner possible