TradeoffsChapter 1 Section 2

Section 2 – tradeoffsTradeoffs – sacrificing one good or service to purchase another.Individuals, families, businesses, and societies are forced to

make trade-offs every time they use their resources in one way and not another.

Opportunity Costs – value of the next best alternative given up for the alternative that was chosen.

Other activities you could have chosen to do during that time.

Opportunity costsExamples:Could have slept in this morning if you had not gone to

school.Give up 4 years of income if you go to college.Congress spent $700 million on stimulus. Could have spent

it to reduce debt.Pg. 13 Global Economy story.

*You have opportunity costs every time you make a choice.

Production possibilityProduction possibility curve – graph showing the maximum

combinations of goods and services that can be produced from a fixed amount of resources in a given period of time.

Look at graph on page 15.Helps businesses determine how much of each items to

produce, revealing the trade-offs and opportunity costs involved in each decision.

Factors of productionThe Classic Example – Military Defense vs. Civilian

goods.

Create a poster like the one below illustrating an opportunity cost you may make in your life.