1. EQ: What is scarcity? What is the difference between opportunity costs and trade-offs? Agenda: 1. Lecture: Scarcity, Opportunity Cost, and Trade-offs 2. Video: Opportunity Cost

2. Forces us to make decisions. Two definitions of scarcity. To be scare a resource only has to meet ONE of the following: 1. Limited quantities of resources to meet unlimited demands 2. More than one valuable use

3. Trash Depends on if it is a landfill, or if someone turns it into “treasure” Land Yes Pollution No iPads Yes

4. 1. Old economics textbooks collected in a bookcase near the teacher’s desk with a sign that says “Free books, take as many as you want.” The books have been there for three years. No 2. Old economics textbooks collected in a bookcase near the teacher’s desk with a sign that says “Free books, take as many as you want.”Another sign posted in the hallway says “$10 paid for any recycled textbook. Bring books to the Principal’s office.” Yes, more than one use

5. 3. One economics textbook, five students who wish to do well in the economics course, and an important test in class the next day. Yes 4. Petroleum in Japan, a country without its own oil fields and without oil reserves. Yes 5. Petroleum in Saudi Arabia, a country with many oil fields and oil reserves. Yes

6. Everyone, even Bill Gates, deals with scarcity. What is scarce for Bill Gates? Time, knowledge

7. http://www.reffonomics.com/TRB/chapter1/opportuni tycost.swf http://www.reffonomics.com/TRB/chapter1/opportuni tycost.swf Watch video titled “Opportunity Cost” What’s the point? Why should economists and YOU care? Your choices have more implicit costs, usually hidden, than explicit costs. You need to consider them when making decisions.

8. Imagine you scored a ticket to the Super Bowl. You paid $200 for your ticket, a stretch for your budget but worth it for a once-in-a-lifetime opportunity. You sit down in your seat next to some schmuck who admits he paid $5000 to a scalper for his ticket. Five grand! That's madness. An annoying economist is sitting on the other side of you. He includes himself in the conversation and says, “Your ticket just cost you five grand, too, even though only $200 in cash ever left your wallet.” Explain why the economist is correct.

9. If the schmuck next to you was willing to buy a seat for $5000, then you could have sold yours at that price, too. The opportunity cost of you using your ticket is the five grand you didn't make by scalping it. Hope it was a good game!

10. 1. Research the explicit costs of attending college next year. Look at the costs associated with your #1 college choice. 2. Next, give at least 2 alternatives to attending college. Circle the one that is that is the opp. cost. Which ones are considered tradeoffs? 3. Calculate (or list, if difficult) the opportunity (implicit) costs in attending college. 4. Does this activity make you think more about the costs involved with your decisions? Why or why not?

13. After graduating with an accounting degree, you decide to become a rock star. Your opportunity costs include which of the following? I. Goods forgone to build and furnish a home studio in which to practice and record II. Tuition costs III. Forgone income as an accountant A. I only B. II only C. I and II only D. I and III only E. I, II, and III