1. Chapter 1 Section 3 Trade Offs and Opportunity Costs

2. Trade Offs What are Trade Off’s? Alternative choices to the decisions we make What are we giving up? See decision making grid in reading. Opportunity Cost Broad term, cost of the next best alternative Leads to Possibilities when it comes to production

3. Production Possibilities Frontier The PPF Illustration of Opportunity Cost Diagram that factors in resources available showing combinations of goods and services an economy can produce Points on the grid all have meaning Inefficient when we are not operating on the line

4. Economic Growth The PPF is potential output at any given time Frozen in time, but things always change Growth will cause the curve to shift to the right What causes growth? Technology, productivity increases, new capital

5. Thinking like an economist Economic Models Simplified equation, graph, or figure showing how something works Usually based on assumption, what we think is true Cost Benefit Analysis Way of Comparing cost to the benefit received

6. Free Enterprise One in which business is privately owned and individuals not government make decisions on the factors of production Standard of Living The quality of life based on what we have