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Opportunity Cost. Trade-Offs. Trade-offs- All the alternatives that we give up whenever we choose one course of action over another. Individual and Trade-offs Choosing more time at work over going to a baseball game---or playing soccer over working a part time job. Business and Trade-offs
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Trade-Offs • Trade-offs- All the alternatives that we give up whenever we choose one course of action over another. • Individual and Trade-offs • Choosing more time at work over going to a baseball game---or playing soccer over working a part time job. • Business and Trade-offs • Farmers choose to plant broccoli over cauliflower. • Society and Trade-offs • GUNS AND BUTTER- a country that chooses to produce more military goods (guns) has fewer resources to produce consumer goods (butter)… and vice versa. (Steel used to make a tank instead of dairy equipment.)
Opportunity Cost • Opportunity cost- The most desirable alternative given up as the result of a decision. • A family that buys a computer cannot use the same money to pay for their second choice—going on a family vacation. • The farmer who chose to grow broccoli instead of cauliflower experienced the opportunity cost of planting cauliflower • The country that produced more “guns”, has less “butter” as their opportunity cost.
Thinking at the Margin • Thinking at the Margin- when you decide how much more or less to do. • This is not an “all or nothing” approach.
Opportunity Cost • RANK THESE IN ORDER OF THE VACATION YOU WOULD CHOOSE. (first choice at top). • Cabo San Lucas, Mexico—beach vacation • Rome, Italy—European vacation • Sydney, Australia—Australian vacation • Breckenridge, Colorado—skiing vacation • New York City, New York—city vacation