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Essential Question:Essential Question:Explain the difference between trade-offs

and opportunity cost and identify what a production possibility curve is and what is can illustrate.

SECTION 3Opportunity CostsOpportunity Costs

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Trade-Offs and Opportunity CostTrade-Offs and Opportunity CostTrade-offs are the alternative choices people

face in making an economic decision.A decision making grid can list the

advantages and disadvantages of each choice

Economic Choices and Economic Choices and Decision MakingDecision Making

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Decision Making Grid (Do Not Copy)Decision Making Grid (Do Not Copy) 1.) Copy the grid that appears on the whiteboard to

the left of class in your notes! 2.) Fill in each of the five missing restaurants 3.) For each restaurants, give it a score from 1-5 in

each of the 3 categories. 4.) Add up the scores from each category and write

the total in the 4th column

Economic Choices and Economic Choices and Decision MakingDecision Making

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Trade-Offs and Opportunity Cost Trade-Offs and Opportunity Cost (continued)(continued)Opportunity Cost is the cost of the next best

alternative among a person’s choices. O.C. includes all of the resources consumed

(or not consumed), benefits lost/gain, or consequences suffered from choosing something over another.

In other words, choose wisely

Economic Choices and Economic Choices and Decision MakingDecision Making

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Opportunity Cost in detailOpportunity Cost in detail If you narrowed your choice between McD’s and

B.K. and chose McD’s, what are the consequences of this decision?

More money spent? Less time since it’s further away? Poorer Selection of food?

The point is when making choices, consider all of the things that make up the opportunity cost so that you use ALL of your resources wisely

Economic Choices and Economic Choices and Decision MakingDecision Making

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Assumptions involved in creating a Assumptions involved in creating a production possibilities curve:production possibilities curve: that the amount of available resources and

technology will not change during the time being studied

that all the resources being used are utilized as efficiently as possible

SECTION 3Opportunity CostsOpportunity Costs

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Reasons future production possibilities Reasons future production possibilities might differ from current production might differ from current production possibilities:possibilities:changes in technologychanges in the factors of production

SECTION 3Opportunity CostsOpportunity Costs