O PENING A CTIVITY 1. Make a list of all the things you could purchase with $ From your list, choose your top Make a list of the pros and cons of your top Now choose one. How did you decide that was your top choice?

O PPORTUNITY C OST

C HOICES AND T RADE - OFFS Our choices, or decisions, involve trade-offs trade-offs are all the things we give up when we make a decision Individuals Businesses Society/Govt “guns or butter”: military spending vs. production of goods

T RADE - OFF E XAMPLE Choose to go to Disneyland Trade-offs are: Class Sleep Beach ?

T HINK -P AIR -S HARE What are trade-offs of… Going to a movie Tuesday night Apple hires 1,000 new employees U.S. spends $5 billion on improving highways in the Midwest

W HAT IS THE O PPORTUNITY C OST ? Opportunity cost is the most desirable alternative given up as the result of a decision AKA: what you could have had instead (your next- best choice) Opp. Cost exists b/c of scarcity

D ECISION -M AKING G RID Alternatives Sleep inWake up early to study Benefits 1.Enjoy more sleep 2.Have more energy during the day 1.Better grade on test 2.Teacher and parental approval 3.Personal satisfaction Decision Sleep inWake up early to study for test Opportunity cost Extra study timeExtra sleep time Benefits lost 1.Better grade on test 2.Teacher and parental approval 3.Personal satisfaction 1.Enjoy more sleep 2.Have more energy during the day

THINKING AT THE M ARGIN choices aren’t always just between 2 alternatives Thinking at the margin is deciding to add or subtract one unit (minute, dollar) Ex: instead of sleep OR study, it’s how much can I have of both? When thinking at the margin, you can find the opportunity cost

"When it takes, at least, an additional four years of schooling, and over $100,000 in costs and lost earnings, why would a person want to graduate from college instead of dropping out after the ninth grade?" E CONOMIC M YSTERY

Year Direct Costs of College Opportunity Costs (Lost wages) 1$12,000$20,000 2$12,500$20,500 3$13,000$21,000 4$13,500$21,500 Total$51,000$83,000

Do your career aspirations require post- high school education? If so, what kind and for how long?

E CONOMIC T RUTHS 1. People economize. People choose the alternative which seems best to them because it involves the least cost and greatest benefit. 2. All choices involve cost. Cost is the second best choice people give up when they make their best choice. 3. People respond to incentives. Incentives are actions or rewards that encourage people to act. When incentives change, people's behavior changes in predictable ways. 4. Economics systems influence individual choices and incentives. How people cooperate is governed by written and unwritten rules. As rules change, incentives change and behavior changes. 5. Voluntary trade creates wealth. People can produce more in less time by concentrating on what they do best. The surplus goods or services they produce can be traded to obtain other valuable goods or services. 6. The consequences of choices lie in the future. The important costs and benefits in economic decision making are those which will appear in the future. Economics stresses making decisions about the future because it is only the future that we can influence. We cannot influence things that have happened in the past.