1. Making Economic Decisions
18.2

2. Scarcity and the Choice Societies Make
Limited Resources
Unlimited Wants
Scarcity
Not enough resources to produce everything you want or need
Choices ALL Societies Make
For Whom to produce
What to produce
How much to produce

3. Trade-offs
Deciding to choose to do one thing over another

4. Opportunity Cost
The cost of the next best use of your time or money when you choose to do one thing rather than another.
The cost (consequence) of choosing one thing over another

5. What will it cost you?
If you choose to ride a bike instead of take a car.

6. Costs of doing business…

7. Fixed Cost
Costs or expenses that are the SAME no matter how many units of a good are produced.
Examples: mortgage payment, car payment, or property taxes

8. Variable Cost Expense that changes with the number of units produced
Example: wages or raw materials

9. Total Cost
Fixed cost + variable cost= total cost

10. Making informed decisions
Use a cost-benefit analysis to make a good decision!

11. (Marginal) Cost
The disadvantage or negative of a decision
What if?

12. (Marginal) Benefit The satisfaction or advantage of a decision.
Why is it a good idea?

13. Cost-Benefit Analysis
Compare benefit (advantages) to cost (disadvantages)
Is it worth it to do it?
Is it too costly?