Chapter 1.3 Choices & Decision Making

1. Chapter 1.3 Choices & Decision Making

2. Objective • Analyze trade-offs & opportunity costs. • Explain the reasons for studying economics.

3. Section Key Terms • trade-off • opportunity cost • production possibilities frontier • cost-benefit analysis

4. Because resources are scarce, consumers must make wise choices • Trade-offs – alternative choices • Opportunity Cost – the cost of the next best alternative (time, $, or resources) • What you give up • Production Possibilities Frontier – diagrams various combinations of goods & services an economy can produce when all productive resources are fully employed (graphs p. 23)

5. Matt has 2 choices for a summer job. The 1st opportunity is at a computer manufacturer, where he would earn $10.25 an hour. The 2nd is with a landscaping company, where he could work & have lunch with 3 of his closest friends every day. That job would pay $8.65 an hour. For one 40-hour workweek, what would be the opportunity cost, in dollars, of accepting the landscaping job? What would be the opportunity cost of accepting the manufacturing job?

6. Cost-Benefit Analysis: The benefit should outweigh the cost Economics for Citizenship: Studying economics will make not tell you what decisions to make, but it will help you become a better decision-maker