Download Economics: Unit I - Henry County Schools

Economics:
Unit I
Productivity & Making Choices
Questions for focus
[standards SSEF1 & 2]
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What does resource allocation mean?
What is a trade-off?
What is opportunity cost?
How do people make rational decisions when
confronted with scarcity?
• What is a cost-benefit analysis?
(rational decision benefits>/= costs)
• What is a production possibilities curve?
Resource allocation
• How people or
governments
determine who
gets what
• US $$$, China
government
decides
• Traditional systems
(Native tribes):
trade (barter)
Trade-off
•Choices people must make when faced with scarcity
Opportunity cost
• The cost of the next-best alternative use of money,
time or resources
$1500 to spend
Vacation or car payments/insurance/upkeep?
How do you make rational decisions when
confronted with scarce resources?
• How do you decide how you spend your money?
• More satisfaction? Highest/best return?
How would you spend $1000?
Cost-benefit analysis
• Comparing the cost of an action to the benefits
Jeans vs. soccer cleats
You have $300 to spend. You’re
a soccer player and you
need new cleats (your old
cleats are worn out). You’re
also a student, and you need
new jeans for school (for the
same reasons).
• What do you do?
• Reasons to buy the cleats:
• Reasons to buy the jeans:
• How can you get both? Is
there some kind of
compromise?
Rational decision making
• A rational decision is when the benefits outweigh or are equal to the
costs. (This can be subjective!)
• Classic example: “guns” vs. “butter”
• Which is more important? Security/protection, or education/health
care/roads/consumer products?
• Cost benefit analysis: can these issues be analyzed in terms of $?
Production
possibilities
curve
(see pg. 23)
•Draw the
production
possibilities curve
for guns & butter
•The curve is the
maximum that can
be produced
Term Review
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Resource allocation (scarcity)
Trade-offs
Opportunity cost
Rational decision making
Cost-benefit analysis
Production possibility curve (frontier)