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Chapter 1 What is Economics?. Section 2 Trade-Offs and Opportunity Costs. Trade-Offs and Opportunity Costs. Isn’t this the meaning and s cope of economics???. Trade-Offs and Opportunity Costs. Opportunity Cost. Because resources are scarce, people can’t have everything they want.

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chapter 1 what is economics

Chapter 1What is Economics?

Section 2

Trade-Offs and Opportunity Costs

trade offs and opportunity costs
Trade-Offs and Opportunity Costs

Isn’t this the meaning and

scope of economics???

trade offs and opportunity costs1
Trade-Offs and Opportunity Costs

Opportunity Cost

Because resources are scarce, people can’t have everything they want.

Therefore, they face trade-offs (alternative choices about spending their time or income)

Each trade-off had advantages and disadvantages

How do you decide? A decision making grid!

Economists view cost as an opportunity cost (Choosing the next best thing or alternative when considering the use of money, time, or resources).

http://www.youtube.com/watch?v=q1n4yiPPKSw

Trade-Offs Among Alternatives

trade offs and opportunity costs2
Trade-Offs and Opportunity Costs
  • To determine what will be gained or lost in your personal life, a business, or in a economy, economist implement a production possibilities frontier (a diagram of goods and services , two at a time, that an economy can produce at full-strength).
  • Look at pg. 16 in your books at The Production Possibilities Frontier (PPF).
    • Some things to think about:
      • On the graph labeled “A” what could make the quantity of guns rise and the butter to stay the same?
      • On the graph labeled “B”, what does it mean when the caption reads, “When all resources are not fully used, a country cannot reach its potential.”?
        • What are some hypothetical possibilities on why the production of butter went down 200 units, but the gun manufacturer did not suffer any lack in production.
  • How does our nation’s drop-out rate affect the PPF?
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Production Possibilities Frontier

Each Unit x 10,000

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Guns

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20

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10

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0

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60

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Butter