Ch. 1.3 Notes: Economic Choices

I. Tradeoffs- process of deciding what to buy based on our limited income.

A. Example: I have $10. I am thinking about which to to buy…..

II. Opportunity Cost- The item we didn’t buy after deciding.

A. I buy the shirt. What is the Opp. Cost?

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III. Production Possibilities Curve- Shows how much a company can make of two products.

A. Ex. Today I produce at level “D”. Tomorrow I produce at

level “C”. How many less Tractors will I make?

How many more Bread will I make?

IV. Cost vs. Benefit Analysis ……

Each of us have internal preferences on

spending decisions we make.

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CH. 1 Review Handout3. C,B,A4. See board, left side5. Paradox of Value6. M = S SL = G I = G H = S MT = S S = G9a. Tim b. Dentist c. Candy10a. 8 burgers b. 10 – 7 = 3