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Economics

Learn about economics, its fundamental concepts, and how to allocate scarce resources to satisfy unlimited wants. Explore the relationship between wants, resources, scarcity, choice, and opportunity cost.

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Economics

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  1. Economics Basic Concept (opportunity cost)

  2. Introduction of Economics • Study of human behavior • Social Science • How to allocate the scarce resources to satisfy our unlimited wants (assumption) • Maximize happiness (assumption) • Divided into microeconomics and macroeconomics

  3. OUR AIMS : >> Help you to understand the basic concept of Economics clearly >> Give you a chance to think more about Economics in our daily life >> Give you a fun way to learn Economics >> Give you an active way to learn Economics

  4. Meaning : • WANT : human desires for goods and services (unlimited) • RESOURCES : material in the world (limited , scarce) • SCARCITY : a situation in which the resources available • for producing goods and services are not • enough to satisfy human wants • CHOICE : acts of choosing • OPPORTUNITY COST : defined as the value of the highest- • valued option forgone

  5. The Relationship Between Them WANTS > RESOURCES ¦ ¦ SCARCITY ¦ ¦ CHOICE ¦ ¦ OPPORTUNITY COST If the resources are not enough to satisfy human wants, scarcity occurs.Then we need to make choice, so we have opportunity cost.

  6. Today, we will focus on opportunity cost only, because it is difficult to understand clearly. Later,we will show some creative pictures to you in order to help you to understand the concept of opportunity cost.

  7. Example 1

  8. Option1 : Jelly Option2 : Bread Peter is hungry.He has two kind of food to choose to eat.He can either eat jelly or bread.If he chooses to eat jelly,his opportunity cost is________________________________________________. to give up the option to eat bread

  9. Example 2

  10. Building A Building B Building C First urgent : construct building A Second urgent :construct building B Third urgent :construct building C In terms of opportunity cost,explain whether the cost of the second urgent and the third urgent choices are the same.

  11. Answer: The opportunity cost is defined as the highest-valued option forgone. The opportunity cost of constructing building B is to give up the option to construct building A. The opportunity cost of constructing building C is to give up the option to construct building A. Therefore, the cost of them are the same. **Remember only the highest-valued option forgone is the opportunity cost, not all options are opportunity cost.

  12. Example 3

  13. Mary spends 15 minutes to make a piece of sandwich May spends 15 minutes to make a piece of sandwich Mary’s sandwich May’s sandwich Are their time cost the same?

  14. Answer: Time itself tells us nothing about the cost. Cost is about the value of the highest alternative use of time. Time cost refers to the income or return one has forgone within a certain time interval. Although they spend the same amount of time making sandwiches, their costs are not the same because the value of the highest option forgone of using time is different. **Remember time itself is not a cost.

  15. Example 4

  16. orange grape Explain whether john’s opportunity cost of eating oranges would change if a)the orange becomes bad b)the grape is sweeter than he expect

  17. Answers: A)John’s opportunity cost of eating orange is to give up to eat grape. If the orange becomes bad,it isn’t about the cost .This would not affect John’s opportunity cost of eating orange. B)John’s opportunity cost of eating orange is to give up to eat grape. If the grape is sweeter than he expects,the value of the option to eat grape increases,so John’s opportunity cost of eating orange will increases. **Remember the change in value is not equal to change in cost

  18. Remarks: • Only the highest -valued option forgone is the cost. • Cost change only if the highest -valued option forgone change. • No option ,no cost. • A change in value is not equal to change in cost. • Time itself is not a cost.

  19. 1 2 3 4 5 6 E C O N O M I C S PUZZLE DOWN: Resources 1 ___________ is limited and scare 2 When wants > resources -----_____________ occurs 3Want is ____________ 4 No __________,no cost 5 _________itself isn’t a cost 6 We need to make ________ in our daily life Scarcity unlimited option Time choices

  20. THE END

  21. Written By : Celia Chan 4A (1) Emily Tse 4A (32) Yammie Fung 4A (10) 2000 --- 2001

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