Presentation on theme: "Trades Offs, Choices, Opportunity Costs"— Presentation transcript:
1Trades Offs, Choices, Opportunity Costs Marginal UtilityYour group is building a new zoo.You have to decide what animals to have.Space is limited. You get 25 acres.Take 8-10 minutes to make your selections, based on the next slide.
2Zoo Choices – 25 acres total! Lion - 2 acresTurkey - 1/10 acreGiraffe -1 acreSeal - 1/2 acreCamel - 1/2 acreCheetah - 1 acreCow - 1/3 acreMonkey - 1/2 acreAsian Elephant - 1 acreAfrican Elephant acresReptile House - 5 acresHammerhead Shark - 1/2 acreKangaroo - 1/2 acreTiger - 1 acreWhales - 3 acresHouse of Birds - 5 acres*Numbers are acres required for ONE animal (hint: they don’t like being alone!)[If you had 2 of each, it would take over 34 acres–so you will have to make choices.]
325 ACRESLion - 2 acres; Turkey - 1/10 acre; Giraffe -1 acre; Seal - 1/2 acre; Camel - 1/2 acre;Cheetah - 1 acre; Cow - 1/3 acre; Monkey - 1/2 acre; Asian Elephant - 1 acre;African Elephant acres; Reptile House - 5 acres; Hammerhead Shark - ½ acre;Kangaroo - 1/2 acre; Tiger - 1 acre; Whales - 3 acres; House of Birds - 5 acres.*Numbers are acres required for ONE animal (hint: they don’t like being alone!)[If you had 2 of each, it would take over 34 acres – so you will have to make choices.]
425 ACRES Two camels Two seals To get you started here are some examples of what you might do!Two monkeysThis would have taken care of 7 of the 25 acres. 18 more to go!TwoAsianelephantsTwo camelsRemember that 2 of eachhelps future zoo stock.Two sealsTwo tigers
53. Why didn't your group put a turkey in your zoo? Questions1. Why didn't your group put one of every animal in the zoo? Scarcity2. We had a trade off problem.If we wanted more on one animal we had to give up more of another animal.3. Why didn't your group put a turkey in your zoo? Benefits vs. costs (turkeys, like cows, are too common)4. Why would be an economic problems with a zoo with only monkeys? Diminishing[less] marginal[extra] utility[satisfaction]5. Why would your group likely choose an Asian elephant and not an African elephant?Benefits vs. costs (the Asian Elephant takes less land)
6Law Of Diminishing Marginal Utility A law of economics stating that as a person increases consumption of a product - while keeping consumption of other products constant - there is a decline in the marginal (incremental) utility (satisfaction) that person derives from consuming each additional unit of that product.
7This is the premise on which buffet-style restaurants operate This is the premise on which buffet-style restaurants operate. They entice you with "all you can eat," all the while knowing each additional plate of food provides less utility than the one before. And despite their enticement, most people will eat only until the utility they derive from additional food is slightly lower than the original.
8For example, say you go to a buffet and the first plate of food you eat is very good. On a scale of ten you would give it a ten. Now your hunger has been somewhat tamed, but you get another full plate of food. Since you're not as hungry, your enjoyment rates at a seven at best. Most people would stop before their utility drops even more, but say you go back to eat a third full plate of food and your utility drops even more to a three. If you kept eating, you would eventually reach a point at which your eating makes you sick, providing dissatisfaction, or 'dis-utility'.
9Questions [continued] 6. What was the last animal to make the cut for your zoo? Marginal Analysis7. What was the animal that just missed the cut for your zoo? That animal is the “opportunity cost” [“opportunity lost”]8. What animal did everyone in your group agree to include ___? 9. Would everyone in your group have made the same choices if they did the zoo alone? Individual benefits vs. social benefits
10Marginal AnalysisAn examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions.
11For example, if you already exercise five times a week and are thinking about adding a sixth day, you would use marginal analysis to determine whether the benefits of the sixth day, such as additional calories burned, endurance gained and muscle built, would be worth the costs of the sixth day, such as giving up sleeping in on Saturdays, having less energy to do your other weekend activities, and increasing your risk of injury.