Warm Up9/7/11 You were “fed” last week at the senior retreat. Was it a “free” lunch? Explain your answer.

Review with your neighbor… 1.Define scarcity 2.Define Economics 3.Identify the relationship between scarcity and choices 4.Explain how Macroeconomics is different than Micro 5.Explain the difference between positive and normative economics 6.Identify the 5 main assumptions of Economics 7.Give an example of marginal analysis 8.Name 10 Disney movies

Analyzing Choices

Objectives  Define trade-off and opportunity cost.  Explain the difference between trade-offs and opportunity costs.

Given the following assumptions, make a rational choice in your own self-interest (hold everything else constant)… 1. You want to visit your friend for a week 2. You work every weekday earning $100 per day 3. You have three flights to choose from: Thursday Night Flight = $275 Friday Early Morning Flight = $300 Friday Night Flight = $325 Which flight should you choose? Why?

Trade-offs and Opportunity Cost ALL decisions involve trade-offs. The most desirable alternative given up as a result of a decision is known as opportunity cost. Trade-offs are all the alternatives that we give up whenever we choose one course of action over others. (Examples: going to the movies) What are trade-offs of deciding to go to college? What is the opportunity cost of going to college? GEICO assumes you understand opportunity cost. Why?

Econ in the Movies

Paul Solman Video: Opportunity Lost

DO NOW: Problem 1  You have $12 and can buy a pizza, a DVD movie, or a package of CD-Rs. You decide to buy the pizza and think that if you hadn’t been so hungry, you would have purchased the DVD.  What is the opportunity cost of your pizza?

DO NOW: Problem 2  Sarah usually plays tennis for two hours a week and her grade on each math test is usually 70 percent. Last week, after playing two hours of tennis, Sarah thought long and hard about playing for another hour. She decided to play another hour of tennis and cut her study time by one additional hour. But the grade on last week’s math test was 60%.  A. What was Sarah’s opportunity cost of the third hour of tennis?  B. Given that Sarah made the decision to play the third hour of tennis, what can you conclude about the comparison of her marginal cost of the second hour of tennis?  C. What Sarah’s decision to play the third hour of tennis rational?