1. DO NOW – Write out the answers as a complete sentence to the question! 1. Opportunity cost is (a) any alternative we sacrifice when we make a decision. (b) all of the alternatives we sacrifice when we make a decision. (c) the most desirable alternative given up as a result of a decision. (d) the least desirable alternative given up as a result of a decision. 2. Economists use the phrase “guns or butter” to describe the fact that (a) a person can spend extra money either on sports equipment or food. (b) a person must decide whether to manufacture guns or butter. (c) a nation must decide whether to produce more or less military or consumer goods. (d) a government can buy unlimited military and civilian goods if it is rich enough.

2. Want to connect to the PHSchool.com link for this section? Click Here!Click Here! Section 2 Assessment 1. Opportunity cost is (a) any alternative we sacrifice when we make a decision. (b) all of the alternatives we sacrifice when we make a decision. (c) the most desirable alternative given up as a result of a decision. (d) the least desirable alternative given up as a result of a decision. 2. Economists use the phrase “guns or butter” to describe the fact that (a) a person can spend extra money either on sports equipment or food. (b) a person must decide whether to manufacture guns or butter. (c) a nation must decide whether to produce more or less military or consumer goods. (d) a government can buy unlimited military and civilian goods if it is rich enough.

3. Do Now – In Your Notebooks! Describe your decisions regarding the Life Partner Scenarios. What’s most important to you? What are you unwilling to give up and what are you willing to compromise on? Use economic language in your response: Easy: choice, opportunity cost, trade-off Challenge: cost/benefit analysis, marginal analysis

4. The Decision-Making Grid BenefitsEnjoy more sleep Have more energy during the day Better grade on test Teacher and parental approval Personal satisfaction DecisionSleep lateWake up early to study for test Opportunity costExtra study timeExtra sleep time Benefits forgoneBetter grade on test Teacher and parental approval Personal satisfaction Enjoy more sleep Have more energy during the day Sleep lateWake up early to study Alternatives Karen’s Decision-making Grid

5. Thinking at the Margin When you decide how much more or less to do, you are thinking at the margin. Options 1st hour of extra study time 2nd hour of extra study time 3rd hour of extra study time Benefit Grade of C on test Grade of B on test Grade of B+ on test Opportunity Cost 1 hour of sleep 2 hours of sleep 3 hours of sleep

6. Marshmallow Experiment Each additional marshmallow is less and less appealing as the first ones. Eventually buying marshmallows insn’t worth it. Marginal utility is the additional satisfaction expected from each marshmallow. The experiment illustrates diminishing marginal utility.

7. Why learn about the margin? Economics rarely deals with situations that are all or nothing – absolute amounts or totals. It focuses on what happens if a small change is made… The consequence of each step is an important consideration, as well as the added benefit! Example: The Hydration Experiment

8. Definitions Marginal Benefit – additional benefit of consuming one more unit Marginal Cost – additional cost of consuming one more unit

9. Marginal Cost & Benefits

11. Other examples of using marginal analysis? Should I buy one more soda at the ball game on a hot day? Should I supersize? Should I take advantage of a deal?

12. Other examples of using marginal analysis? Should I take an extra newspaper from the stand on the corner when I only bought one? What’s another type of vendor that doesn’t allow you to take more than one? Why?

13. Left-Food Pattern Factory You will produce left-food tracings You have one minute per session. You want to produce as many as possible. I’m quality-control so don’t be careless! You must stay inside the factory. We’ll add more workers each round.

14. Marginal Product

15. As additional workers were hired… What happened to the total number of left- foot patterns produced? What happened to marginal product? Why do you think this occurred?  Law of diminishing returns.

16. Marginal Cost & Benefits