Presentation on theme: "Task: How do you budget your time in a typical weekday? Use today for example, and write down how you divided the time you had during the day? Would you."— Presentation transcript:
Task: How do you budget your time in a typical weekday? Use today for example, and write down how you divided the time you had during the day? Would you like to have more time in the day? If you had more time, what would you do with it?
AIM: How does scarcity affect economic decisions?
Scarcity: The Basic economic problem that arises because people have unlimited wants, but resources are limited
Imagine that you are off at college You have a budget of $100,000 for the year. How would you divide your budget? Create a pie chart How did you decide on what to use your limited money to purchase? (hint: think about utility)
A rational person would try to maximize total utility given the total amount of scarce resources that they have available (for example time and money). Pick an economic choice that you have made before: What were the alternatives that you had for budgeting your scarce resource (time or money) How did you decide upon budgeting your time and money the way you did? (why didn’t you pick the alternatives)? How does this relate to the concept of utility
Going back to the all you can eat pizza problem that we did yesterday
Pizza problem: Try to quantify in dollar terms the level of utility that you would receive from each slice of pizza (For example, I would receive $5 worth of utility from eating the first slice, and $4 worth of utility from the second etc. – you may also negative values)
Pizza Problem 1) If you had to pay $5 for all you can eat pizza (but only had to pay once), when would you stop eating pizza? Why? 2) If you had to pay $1.50 for each and every slice of pizza instead, when would you stop eating? Why? 3) If you had a choice of either taking the $5 all you can eat deal, or the pay per slice deal ($1.50/slice), which would you choose and why?
Homework (due 9/21) List and explain two examples of diminishing marginal utility (explain in detail, how and why the marginal utility for that product is declining). 1-2 paragraphs for each product