1 / 28

Opportunity Cost

Opportunity Cost. In this lesson, students will be able to define the following key words and concepts: Trade-offs Opportunity Cost Guns or Butter Thinking at the Margin. Essential Question?.

bradleygbrown
Télécharger la présentation

Opportunity Cost

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Opportunity Cost In this lesson, students will be able to define the following key words and concepts: Trade-offs Opportunity Cost Guns or Butter Thinking at the Margin E. Napp

  2. Essential Question? • EQ 2: How do economic trade-offs force industries to prioritize resources and Efficiency? E. Napp

  3. Scarcity exists. We have endless desires but limited resources. In Economics, we must choose. E. Napp

  4. Trade-off • A trade-off occurs when we choose one course of action over another. • In Economics, we can never have everything we want or need. • We must make choices. • A woman spends ten dollars buying her lunch at a local restaurant. She cannot use the same ten dollars to buy a book. A trade-off has occurred. E. Napp

  5. Sometimes a society is more concerned with economic growth than environmental quality. E. Napp

  6. It’s All About Scarcity! • Scarcity exists. Our wants and desires are limitless but our natural resources are limited. • We can always want more than we have. As such, we are constantly choosing one course of action over another. • We cannot spend ten dollars on a movie ticket and the same ten dollars on a restaurant meal. E. Napp

  7. E. Napp

  8. Opportunity Cost • Whenever we make a decision, we receive one thing but give other things up. • If I chose to study tonight for the examination, I cannot go to the party or the movies or walk the dog. • The most desirable alternative given up for the decision is the opportunity cost. • Think of the opportunity cost as the best course of action of all those things you didn’t get. E. Napp

  9. Scarcity and opportunity costs affect individuals, businesses, and governments. E. Napp

  10. Guns or Butter • Government officials also must choose where to spend tax dollars. • When a government spends more money on the military, it must invariably spend less money on consumer goods like roads and schools. • Economists refer to government trade-offs as Guns or Butter. E. Napp

  11. The Cost of War E. Napp

  12. Thinking at the Margin • Sometimes a decision involves whether to add or subtract one additional unit of a resource. • After studying many hours, a student might ask herself: “Should I study one more hour?” • This question is a question at the margin. • Deciding whether to add or subtract one additional unit occurs at the margin. E. Napp

  13. Should we study one more hour? That is thinking at the margin. E. Napp

  14. Questions for Reflection • Provide examples of trade-offs. • Why do trade-offs exist? • What is the opportunity cost? • Provide an example of an opportunity cost? • What is thinking at the margin? • Provide an example of thinking at the margin. E. Napp

  15. Production Possibilities Graphs • In this lesson, we will examine the various options available to producers. • Students will be able to define the following terms: Production Possibilities Graph Efficiency Underutilization Production Possibilities Frontier E. Napp

  16. Producers have options. Should a farmer grow corn or broccoli? E. Napp

  17. A Production Possibilities Graph • A Production Possibilities Graph shows alternative ways of using a country’s or producer’s resources. • If a farmer uses more of his land to grow corn, he has less land for broccoli. • Every decision has its cost. E. Napp

  18. What is the cost of producing more automobiles? E. Napp

  19. Efficiency • An economy is efficient when it uses resources in such a way as to maximize production. • Why is it important to be efficient? E. Napp

  20. Look at the graph. Where is efficiency occurring? E. Napp

  21. Look at this graph. Where is efficiency occurring? E. Napp

  22. Underutilization • Underutilization is the opposite of efficiency. • Underutilization occurs when an economy uses fewer resources than it is capable of using. • Why do producers avoid the underutilization of resources? E. Napp

  23. Look at the graph. Where is underutilization occurring? E. Napp

  24. The Production Possibilities Frontier • The line on the graph that shows the maximum possible production is called the production possibilities frontier. • At the frontier, efficiency is occurring. • However, new technology can shift the frontier. Think about it! E. Napp

  25. Look at the graph. Where is the production possibilities frontier? E. Napp

  26. Don’t Forget Scarcity! • A producer cannot produce everything. • A producer must make choices. • Remember: It’s all about scarcity. Our resources are limited but our wants and desires are unlimited. E. Napp

  27. It’s all about corn or broccoli. We can’t have it all. E. Napp

  28. Questions for Reflection: • What does a production possibilities graph show? • Define efficiency. • Why is it important to be efficient? • Define underutilization. • What problems are created by underutilization? • What is the production possibilities frontier? E. Napp

More Related