2. OPPORTUNITY COST

3. What you write: We consider the costs and benefits of each of the alternatives What you need to know: How do we make decisions? Everything we do has an economic cost, therefore we have to make decisions because of scarcity.

4. What you write: The benefit is the utility we receive. What you need to know: What are the benefits? Utility - the definition is “ability or capacity of a good or service to be useful and give satisfaction to someone”

5. What you write: OC = the next best use of our resources OC = what we give when we choose what we want What you need to know: What are the costs? Opportunity Costs - the definition is “cost of the next best alternative use of money, time, or resources when one choice is made rather than another”

6. Example Choice Opportunity Cost

7. Example Choice Opportunity Cost

8. Example Choice Opportunity Cost

9. Example Choice Opportunity Cost

10. The why?: Because resources are scarce, so we must choose.

11. Example Choice Opportunity Cost

12. What you write: Production Possibilities Curve (PPC) = Production Possibilities Frontier (PPF) fully employed = being used efficiently What you need to know: How do economists visualize choices? Production Possibilities Curve - the definition is “diagram representing maximum combinations of goods and/or services an economy can produce when all productive resources are fully employed”

15. What you need to know AND what you write: What does a PPC/PPF illustrates? (1) scarcity, (2) opportunity cost, (3) economic growth, (4) choice

16. What you need to know: What is economic growth? The definition is “increase in a nation’s total output of goods and services over time” (see definition)

17. What you need to know AND what you write: How does economic growth happen? Through increases in PRODUCTIVITY (see definition) technology better resources division of labor (see definition) specialization (see definition)

18. What you write: The circular flow model illustrates the movement of money and the factors of production between businesses and households in the factor market and the product market. What you need to know: What is an economic model? The definition is “simplified version of a complex concept or behavior expressed in the form of a graph, figure, equation, or diagram”