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Learn how to analyze trade-offs and opportunity costs in economics, studying the reasons for making wise decisions in resource allocation. Explore production possibilities frontiers and cost-benefit analysis. Delve into scenarios like Matt's summer job choices to understand opportunity costs and decision-making processes.
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Chapter 1.3 Choices & Decision Making
Objective • Analyze trade-offs & opportunity costs. • Explain the reasons for studying economics.
Section Key Terms • trade-off • opportunity cost • production possibilities frontier • cost-benefit analysis
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)
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?
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
