# Welcome to Economics!  Turn your homework into the box  Find a seat where you are free from distractions and be seated when the bell rings.  Turn your.

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Welcome to Economics!  Turn your homework into the box  Find a seat where you are free from distractions and be seated when the bell rings.  Turn your homework into the box  Find a seat where you are free from distractions and be seated when the bell rings.

FOP Quiz

Do Now  Picture yourself walking into the mall. What two things do you want the most? If you can only pick one, which do you choose and why?  Let’s say that you went to the movies with your friends, bought your ticket… but lost it before you got to the ticket clerk.  You have two options:  Pay another \$10 to buy another ticket  Go home, thinking “it’s not worth \$20 to see one movie”  Which did you pick and why?  Picture yourself walking into the mall. What two things do you want the most? If you can only pick one, which do you choose and why?  Let’s say that you went to the movies with your friends, bought your ticket… but lost it before you got to the ticket clerk.  You have two options:  Pay another \$10 to buy another ticket  Go home, thinking “it’s not worth \$20 to see one movie”  Which did you pick and why? 5 minutes End

Objectives of the day:  I can explain opportunity cost in order to analyze real life trade-offs that we face.  I can explain that rational decisions occur when marginal benefits outweigh marginal costs in order to evaluate the various costs and benefits of the decisions that we make.  I can explain opportunity cost in order to analyze real life trade-offs that we face.  I can explain that rational decisions occur when marginal benefits outweigh marginal costs in order to evaluate the various costs and benefits of the decisions that we make.

QOD  W HEN YOU HAVE TO CHOOSE BETWEEN TWO THINGS, WHAT DO YOU MISS OUT ON ?

Scarcity [Unlimited wants meet limited resources] Making Choices Opportunity Costs and Trade-offs

Opportunity Cost: Intro We want a lot of things, but we can’t have them all because there are limited resources on Earth. This is called scarcity. Because of scarcity we have to make choices. When you choose one thing, you must give up another. This is known as the opportunity cost of a decision. This shows how we face trade-offs every day.

Opportunity Cost: Definition  Opportunity cost is the second best choice that you give up when you choose something else. If you choose to spend your money on a new watch, the opportunity cost is the pair of sneakers you would have bought

Opportunity Cost: Common Mistakes WHAT IT ISWHAT IT’S NOT The alternative action that you did not choose The negatives of the action The positives of the action The monetary value (\$) of the action

Testing Skills: MPQ Practice! Kevin Rose Decides to buy a new watch. What is the opportunity cost of this decision? a.The compliments he’ll receive because of the new watch b.\$150, the price of the new watch c.The new shoes he could have bought instead d.The gas he had to pay on the way to buy the watch Kevin Rose Decides to buy a new watch. What is the opportunity cost of this decision? a.The compliments he’ll receive because of the new watch b.\$150, the price of the new watch c.The new shoes he could have bought instead d.The gas he had to pay on the way to buy the watch

Trade-Offs: A World Full of Choices  A trade-off is a situation where you can get more of one good, but only by getting less of another  Every time you choose one thing over another, you have an opportunity cost  A trade-off is a situation where you can get more of one good, but only by getting less of another  Every time you choose one thing over another, you have an opportunity cost Pepsi Co. has \$50 million to spend on advertising. They face a trade-off: should they spend more on TV ads or magazine ads?

Trade-Offs: Personal Directions: When I say go, rank the following items in order of preference in your notebooks  CD  New Shirt  Magazine  Movie Ticket  Dinner Out Directions: When I say go, rank the following items in order of preference in your notebooks  CD  New Shirt  Magazine  Movie Ticket  Dinner Out 1:000:590:580:570:560:550:540:530:520:510:500:490:480:470:460:450:440:430:420:410:400:390:380:370:360:350:340:330:320:310:300:290:280:270:260:250:240:230:220:210:200:190:180:170:160:150:140:130:120:110:100:090:080:070:060:050:040:030:020:01End1:00

Trade-Offs: National Budget Directions: When I say go, rank the following items in order of preference in your notebooks  Upgrade military technology to help the soldiers in Iraq and Afghanistan  Give money to Urban schools to improve graduation rates  Increase funding for Food Stamps for those in need  Give basic health coverage to millions of uninsured Americans  Subsidize oil companies in order to lower gas prices Directions: When I say go, rank the following items in order of preference in your notebooks  Upgrade military technology to help the soldiers in Iraq and Afghanistan  Give money to Urban schools to improve graduation rates  Increase funding for Food Stamps for those in need  Give basic health coverage to millions of uninsured Americans  Subsidize oil companies in order to lower gas prices

OC: Case Study  With your partner, read the case study  circle words you don’t know  Star items you think we should spend more on  Discuss answers with your partner and answer the questions in complete sentences in notebook  With your partner, read the case study  circle words you don’t know  Star items you think we should spend more on  Discuss answers with your partner and answer the questions in complete sentences in notebook 10 minutes End

Everything we do has…  Costs [ Negatives, Disadvantages]  Benefits [Positives, Advantages] There are costs and benefits to everything we do including learning Economics, eating a burger, driving a car, asking someone out on a date, or going on vacation.  Costs [ Negatives, Disadvantages]  Benefits [Positives, Advantages] There are costs and benefits to everything we do including learning Economics, eating a burger, driving a car, asking someone out on a date, or going on vacation.

Rational Decision Making Rational [using reason] decision making means choosing to do something only if the benefits of doing it are greater that costs. Comparing the good and bad things about a choice is called a cost-benefit analysis. Rational [using reason] decision making means choosing to do something only if the benefits of doing it are greater that costs. Comparing the good and bad things about a choice is called a cost-benefit analysis. You will only buy an iPad if there are more advantages to having it than disadvantages.

Cost-Benefit Analysis: Example Benefits  Know the information better when taking test  Higher grade on test  Better report card COSTS  Sleepy during the test – could hurt test grade  Tired in other classes and cannot concentrate It is 10:30 PM and DeMarcus has been studying four hours for his Biology final. He needs one more hour of studying to review every chapter. Should he stay up? He should only stay up if there are MORE BENEFITS THAN COSTS

Thinking at the Margin Instead of thinking about the total costs and benefits, Economists focus on the marginal [additional] costs and benefits. One washing machine is helpful, but what benefit would there be to buying two?

Thinking at Margin: Example You’ve just eaten two tacos for lunch and are trying to decide whether or not to go back for a third. You want one, but if you get another taco now, you will have no money left for a juice after school. Are you really that hungry? You should make a decision only if the marginal benefits outweigh the marginal costs

Diminishing Marginal Utility This means that the more you have of something, the less utility [satisfaction] you get from each new unit. EXAMPLE: When eating, you feel great at first, but slowly start to get less and less utility from each bite until you are full. EXAMPLE: You own a lemonade stand and it starts to get busy. One extra person helps a lot, but each additional person adds less and less.

With Partner  With your partner, work on the practice Marginal cost/benefit questions  your answers should be in complete sentences in your notebook  With your partner, work on the practice Marginal cost/benefit questions  your answers should be in complete sentences in your notebook 10 minutes End

By yourself  Complete the practice questions in your notebook  Silently and independently  Complete the practice questions in your notebook  Silently and independently 10 minutes End

Exit Ticket  Clear your desks for the exit ticket  Silent and independent  Clear your desks for the exit ticket  Silent and independent

Homework  Opportunity Cost Worksheet

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