1. Introductory Economics AS Economics

2. Opportunity Cost Remember? Is the cost of the next best alternative given up Given a list of products, the next one that you would have chosen would be the opportunity cost….so…….

3. OC A firm wants to either build a new factory or spend money on research and development By choosing to build the new factory the OC is the money spent on research and development Easy……..?

4. You have won a free ticket to see Cheryl Cole in concert and you can’t resell it Jedward are performing on the same night and you have considered going to see them – a ticket costs £40, but you would be prepared to pay up to £50 for the ticket (it is worth £50 of enjoyment to you) What is the opportunity cost of seeing Cheryl Cole? a) £0 b) £10 c) £40 d) £50

5. The only thing of value you must sacrifice to see Cheryl is Jedward By not attending Jedward you miss out on something that is worth £50 to you, but you also avoid having to pay £40 for the ticket So the value of what you give up by not seeing Jedward is £50 - £40 = £10 If you master this concept you have achieved more than 2 nd year economics students at a top UK university!

6. Try another……… A teacher can either use his two week holiday to mark A level papers (to supplement his meagre salary) or to paint the outside of his house. If he marks the papers he will receive £700 but it will cost him £500 to pay a decorator. What is the opportunity cost of using the two weeks to paint the house himself? a) £200 b) £500 c) £700 d) 1200

7. Positive and normative statements Consider the following statements Governments should spend more on healthcare than defence Greater government involvement in our lives is a bad thing Alcohol consumption in the UK is too high Greater spending on healthcare will increase life expectancy

8. Positive and normative statements Positive statements represents facts; these can be proven as true or false. Positive statements do not necessarily have to be true! Normative statements are opinions (sometimes have the word ought or should); these cannot be tested as true or false in the same way that positive statements can. These type of statements can influence economic decision making and government policy

9. Scarcity Economists refer to resources as being scarce – there are not enough to meet all of people’s wants; the fact that our wants exceed resources is known as the economic problem As resources are scarce (like time, money, materials etc) then choices need to be made These choices link in with opportunity cost and maximising welfare (which would be rent, wages, profit, interest). Economic agents will choose to maximise their welfare based on their own self interests

10. Scarcity, choice and opportunity cost The BBC produce different websites which can be used for educational purposes. In the UK, no one is charged for this content so it is free to them. a) Why are these websites not free? b) Why has someone at the BBC chosen to produce these websites? c) Identify 2 possible opportunity costs of these websites d) How does this example show scarcity

11. Index Numbers YearOutput £ BnIndex Number 2000820100 2001861 2002984 20031,066 20041,230 20051,435

12. Index Numbers Complete the following table (Base year Bottom) Year£ millionIndex number if base year is: Year 1Year 2Year 3 1500100 2600100 3800100