1. Today’s DOA
Why is it important to evaluate trade-offs and opportunity cost when making choices?

2. Understanding Economics
Production Possibilities

3. What is Economics?
REMEMBER… Economics is the study of how people try satisfy their own needs/wants through the careful use of scarce resources.

4. Opportunity Cost REMEMBER… Provides:
Opportunity cost is the cost of the next best alternative use of money, time, or resources when one choice is made rather than another.
Provides:
The chance to do something
Is of value
Value of the next best alternative
Forces us to evaluate each alternative

5. Thinking Rationally What is a decision? What does rational mean?
A choice that is made.
What does rational mean?
Using reasoning and logic.
What is a rational decision?
A choice that is made using reasoning and logic.

6. Cost vs. Benefit
When we are making decisions we look at the cost versus the benefit of that decision. Weigh the cost. Look at the benefit. When making a rational decision… BENEFIT > COST

7. Production Possibilities
What is production?
Produce, make, create
Refers to the process of creating goods/services.
What are possibilities?
Chances
Options
Choices
Production Possibilities refers to all chances to create a good or service.

8. Production Possibilities
As we take a look at production possibilities we are going to look at the following:
Production Possibilities Frontier
Production Possibilities Curve
Alternative Possibilities
Maximizing Possibilities
Economic Growth
Opportunity Cost

9. Production Possibilities Frontier
Also known as the Production Possibilities Curve, the PPF is a curve depicting all maximum outputs for two or more goods.
Guns vs. Butter
Where would the most efficient production be?

10. Production Possibilities Frontier
Representation of potential output at a given point in time.
All models, such as this, are theories based on assumptions.

11. Production Possibilities Frontier
Alternative Possibilities
All points on and inside the curve.
Points – A, B, C

12. Production Possibilities Frontier
Maximizing Possibilities
All points on the curve.
Points – A, B

13. Production Possibilities Frontier
Economic Growth
Any point outside the curve represents the potential for economic growth.
Point – D

14. Production Possibilities Frontier
Opportunity Cost
Movement on the curve from one point to an alternative point.
A  B
↓5 coconuts
↑10 fish
B  A
↑5 coconuts
↓10 fish

15. Exit Slip Identify the following: Alternative Possibilities
Maximizing Possibilities
Economics Growth
Opportunity Cost
E  F