Principles of EconomicsScarcity, Opportunity Cost &

Trade-Offs

Question of the Day

What country is the traditional home ofthe tango?

Argentina

In 2001 it defaulted on $93 billion worth of debt.

• How doeseconomics help usunderstand theworld?

• What are two keycomponents thathelp us think like aneconomist?

What is scarcity?

• The result of an inability to satisfy all ofeveryone's wants

• What is to be produced, who’s going to get it,how’s it going to be produced, and when is itto be produced?

• What resources are scarce in our society?

• How does scarcity affect you?

Scarcity affects me…

• What is the true cost ofanything?–The amount of money you

spend?–What about whatever you

have to give up in its place?

• That is called, “opportunitycost.”

Opportunity Cost

• The best alternative you giveup when making a choice.

• Who should theLions take with thefirst overall pick inthe draft?– What is the

opportunity cost?

• Should I spend mytime studying mathor studying socialstudies?– What is the

opportunity cost ofstudying math allnight?

Trade-Offs

• How do you decidewhat to give up?

• Will people alwaysagree?

• Therein lies thebasis of mostpolitics.

A choice that involves giving up some ofone thing to have more of another

Marginal Benefit/Cost

• Marginal Benefit– The extra or

additional benefit ofa decision.

• Marginal Cost– The extra or

additional cost of adecision.

Why do drive-up ATM’shave Braille on thekeypads?

What is the opportunity costof going to college after high

school?

What is the opportunity costof spending $20 on a date?

What are three resources thatare scarce for a factory owner?

What does a PPC show?

What does it mean when aPPC moves outward?

How does a rational persondecide what to give up in a

trade-off?

What does “marginal” mean?