do now – write out the answers as a complete sentence to the question! 1. opportunity cost is (a)...
TRANSCRIPT
DO NOW – Write out the answers as a complete sentence to the question!
1. Opportunity cost is
(a) any alternative we sacrifice when we make a decision.
(b) all of the alternatives we sacrifice when we make a decision.
(c) the most desirable alternative given up as a result of a decision.
(d) the least desirable alternative given up as a result of a decision.
2. Economists use the phrase “guns or butter” to describe the fact that
(a) a person can spend extra money either on sports equipment or food.
(b) a person must decide whether to manufacture guns or butter.
(c) a nation must decide whether to produce more or less military or consumer goods.
(d) a government can buy unlimited military and civilian goods if it is rich enough.
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Section 2 Assessment1. Opportunity cost is
(a) any alternative we sacrifice when we make a decision.
(b) all of the alternatives we sacrifice when we make a decision.
(c) the most desirable alternative given up as a result of a decision.
(d) the least desirable alternative given up as a result of a decision.
2. Economists use the phrase “guns or butter” to describe the fact that
(a) a person can spend extra money either on sports equipment or food.
(b) a person must decide whether to manufacture guns or butter.
(c) a nation must decide whether to produce more or less military or consumer goods.
(d) a government can buy unlimited military and civilian goods if it is rich enough.
Do Now – In Your Notebooks!
Describe your decisions regarding the Life Partner Scenarios. What’s most important to you? What are you unwilling to give up and what are you willing to compromise on? Use economic language in your response:Easy: choice, opportunity cost, trade-offChallenge: cost/benefit analysis, marginal analysis
The Decision-Making Grid
Benefits Enjoy more sleep
Have more energy during the day
Better grade on test
Teacher and parental approval
Personal satisfaction
Decision Sleep late Wake up early to study for test
Opportunity cost Extra study time Extra sleep time
Benefits forgone Better grade on test
Teacher and parental approval
Personal satisfaction
Enjoy more sleep
Have more energy during the day
Sleep late Wake up early to study
Alternatives
Karen’s Decision-making Grid
Thinking at the Margin When you decide how much more or less
to do, you are thinking at the margin.
Options
1st hour of extra study time
2nd hour of extra study time
3rd hour of extra study time
Benefit
Grade of C on test
Grade of B on test
Grade of B+ on test
Opportunity Cost
1 hour of sleep
2 hours ofsleep
3 hours of sleep
Marshmallow Experiment
Each additional marshmallow is less and less appealing as the first ones. Eventually buying marshmallows insn’t worth it.
Marginal utility is the additional satisfaction expected from each marshmallow.
The experiment illustrates diminishing marginal utility.
Why learn about the margin? Economics rarely deals with situations that
are all or nothing – absolute amounts or totals.
It focuses on what happens if a small change is made… The consequence of each step is an important
consideration, as well as the added benefit!
Example: The Hydration Experiment
Definitions Marginal Benefit – additional benefit of
consuming one more unit Marginal Cost – additional cost of
consuming one more unit
Marginal Cost & Benefits
Marginal Cost & Benefits
Other examples of using marginal analysis?
Should I buy one more soda at the ball game on a hot day?
Should I supersize?Should I take advantage of a
deal?
Other examples of using marginal analysis?
Should I take an extra newspaper from the stand on the corner when I only bought one?
What’s another type of vendor that doesn’t allow you to take more than one? Why?
Left-Food Pattern Factory You will produce left-food tracings You have one minute per session. You want to produce as many as possible. I’m quality-control so don’t be careless! You must stay inside the factory. We’ll add more workers each round.
Marginal Product
As additional workers were hired… What happened to the total number of left-
foot patterns produced? What happened to marginal product?
Why do you think this occurred?
Law of diminishing returns.
Marginal Cost & Benefits