1. Making Economic Decisions
Economics Pt. 1, Lesson 2

2. Trade-Offs
Scarcity forces people to make choices about how they will use their resources
Every economic decision involves a trade-off
Opportunity cost: the cost of the next best use of your time or money when you choose to do one thing rather than another
Opportunity cost includes more than just money; includes time or opportunities
What is the opportunity cost of playing for the basketball team?

3. Measures of Cost
Fixed costs: expenses that are the same no matter how many units of a good are produced; examples?
Variable costs: expenses that change with the number of products produced; examples?
Total costs: fixed costs + variable costs

4. Revenue and Benefit
Total Revenue: number of units sold multiplied by the average price per unit
Marginal Revenue: the additional revenue from selling another unit of output
Example: Pizza Hut makes $5 for every pizza they sell, how much do they make selling a second or third pizza?
Marginal Benefit: additional extra benefit associated with an action
Example: you pay $10 for a burger, how much would you pay for a second? third?
Cost Benefit Analysis: deciding when the benefits are greater than the costs; what can cause the costs to be greater than the benefit