1. Trade-Offs and Opportunity Costs: What you give up to get something you want 1.How can something be scarce and not in short supply at the same time? 2.How can you give up something you never had in the first place? 3.How can it be wise to take the time and effort to make a well- considered choice and then not follow through on it?

2. Trade-offs In practice, economists tend not to talk about early birds and greener grasses. They've developed their own more technical vocabulary to describe the world of scarcity and choice. For example, when we sacrifice one thing to obtain another, that's called a trade-off. –Only have enough cash to buy a bike or a snowboard, but not both? That's a trade-off. –Trying to decide whether to take the Fourth of July off to spend with your family, or to go to work and make extra overtime? That's a trade-off.

3. Opportunity costs Trade-offs create opportunity costs, one of the most important concepts in economics. Whenever you make a trade-off, the thing that you do not choose is your opportunity cost. –To paraphrase poet Robert Frost, opportunity cost is the path not taken (and that makes all the difference). –You bought that bike? Then the snowboard was your opportunity cost. Decided to work on the Fourth of July? Your opportunity cost was a relaxing day hanging out at the BBQ. Everything has opportunity costs. If you just bought something, you could have always chosen to buy something else instead. "Something else" is your opportunity cost.

4. So what? Sometimes opportunity costs can vastly exceed the sticker price of an item. Imagine you scored a ticket to the Super Bowl. You paid $200 for your ticket, a stretch for your budget, but worth it for a once-in-a-lifetime opportunity. –You sit down in your seat next to some guy who admits he paid $5000 to a “scalper” for his ticket!

5. Was there an opportunity cost? But hold on. Your ticket just cost you five grand, too, even though only $200 in cash ever left your wallet. How's that work? Well, if the other guy was willing to buy a seat for $5000, then you could have sold yours at that price, too. The opportunity cost of you using your ticket is the five grand you didn't make by “scalping” it!

6. Do wealthy people and nations have to deal with scarcity and accept trade-offs? YES! A rich person might have plenty of money but not very much time. A wealthy nation might have lots of bauxite but not very much oil. Every person and every nation has to deal with limitations because every person and nation has limited resources.

7. Check yourself! 1.What is the difference between trade-offs and opportunity costs? How are they related? 2.How can something be scarce and not in short supply at the same time? 3.Does finding more productive resources make things less scarce? 4.How can you give up something you never had in the first place? 5.How can it be wise to take the time and effort to make a well-considered choice and then not follow through on it?