1. Chapter 1 What is Economics? Section 2 Trade-Offs and Opportunity Costs

2. Isn’t this the meaning and scope of economics???

3. Trade-Offs and Opportunity Costs Trade-Offs Among Alternatives Opportunity Cost O Because resources are scarce, people can’t have everything they want. O Therefore, they face trade-offs (alternative choices about spending their time or income) O Each trade-off had advantages and disadvantages O How do you decide? A decision making grid! O Economists view cost as an opportunity cost (Choosing the next best thing or alternative when considering the use of money, time, or resources). O http://www.youtube.com /watch?v=q1n4yiPPKSw http://www.youtube.com /watch?v=q1n4yiPPKSw

4. Trade-Offs and Opportunity Costs O To determine what will be gained or lost in your personal life, a business, or in a economy, economist implement a production possibilities frontier (a diagram of goods and services, two at a time, that an economy can produce at full-strength). O Look at pg. 16 in your books at The Production Possibilities Frontier (PPF). O Some things to think about: O On the graph labeled “A” what could make the quantity of guns rise and the butter to stay the same? O On the graph labeled “B”, what does it mean when the caption reads, “When all resources are not fully used, a country cannot reach its potential.”? O What are some hypothetical possibilities on why the production of butter went down 200 units, but the gun manufacturer did not suffer any lack in production. O How does our nation’s drop-out rate affect the PPF?

5. Guns 010 0 60 50 40 30 20 10 70 60 50 40 30 20 Butter - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Production Possibilities Frontier Each Unit x 10,000