1.  Making an economic decision involves:  Effectively using your scarce resources  Comparing an action’s costs and benefits  There are 2 main factors in this decision-making process:  Utility  Cost 1.2 Economic Choice

2.  Utility  The satisfaction gained from any action  Self-Interest Motive  The assumption that people act to maximize their own welfare Economic Choice

3.  Does donating go against the idea of Self-Interest Motive?  Not necessarily. Economists say that people donate because the personal satisfaction they get from giving to a charitable organization is greater than spending that money in other ways. What About Donating?

4.  Opportunity Cost  The utility that could have been gained by choosing an action’s best alternative  Free Goods  Items that are so plentiful that they do not have any cost  Economic Value  The opportunity cost of a product Economic Choice Cont’d

5.  All people make economic decisions  Hamburger or Pizza?  Silver or Gold?  Honda Civic or Mercedes S Class?  They make these choices with 2 factors:  Utility  Cost Economic Choices Cont’d

6.  The loss of the best alternative  Opportunity Cost is illustrated with a Production Possibilities Frontier (PPF) – next section  Utility is a difficult entity to quantify because:  It is subjective  Differs for each individual Opportunity Cost