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?
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