Chapter 1.2
Opportunity Costs
WARM-UP
• Tell me 5 vacation destinations you would
like to go to...(place them in order of which
you prefer)
• What are you giving up by choosing your
top choice?
Trade - Offs
alternatives
• All of the ___________that
we give up
whenever we choose one course of action
over another.
• Tell me 3 Trade-offs that you made in
order to come to school today…
Guns v. Butter
Goods
• Military v. Consumer
______________
ALWAYS
– RESOURCES ARE ________LIMITED
tank – now can not be used
– Steel to make a _____
to build dairy
________equipment to make butter.
Opportunity Cost
MOST
• The _______
desirable
alternative given up as
a result of a decision
– If I buy a computer, then I can
not use that money to go on
a vacation…
– Should I sleep late or wake
up early for a ski trip?
– Sleep late or wake up early
to take a test?
– Sleep late or wake up early
to go to practice?
Global Connections
 The same decision made in two different countries can
have vastly different opportunity costs. Malaysia bought
two warships in 1992, paying a price equal to the cost of
providing safe drinking water for the 5 million Malaysians
lacking it. In other words, the opportunity cost of the
warships was safe drinking water. The opportunity cost
of building warships in wealthier countries is not nearly
so high. However, there are still costs to consider. In
the US, the number of people employed by the military
decreased dramatically following the end of the cold war.
In response, the Pentagon developed a new program,
“troops to teachers,’ to help former soldiers get jobs
teaching in schools. The switch from army duty to
teaching reminds us that the opportunity cost of a soldier
may be a teacher and vice versa.
Ch 1.3
Production Possibilities Curves
Production Possibilities
graph
• A production possibilities curve, or______,
shows alternative
__________ ways to use an
economy’s resources.
• The axis of the graph can show categories
goods and services
of ___________________,
such as farm
goods and factory goods or capital and
consumer goods.
Drawing a PP Curve
• First an economist decides which
goods or services
_____________________
to examine.
two goods and the
• The line drawn for the ____
combinations of those goods is the
___________
frontier
production possibilities_________.
This
line represents a point at which the
maximum
___________
combination of two
products/resource is being produced.
Watermelons v. Shoes
Food v. Computers
Lets Graph
• Butter 0
80K 100K 120K 130K
• Guns 80K 60K 40K 20K
0K
• Fish
• Coconuts
4
0
3
2
2
4
1
6
0
8
Efficiency, Growth, and Cost
• PP graphs can show
how efficient an
economy is, whether
________
an economy has grown
or shrunk, and the
opportunity cost
_________________of
a decision.
• Efficiency means using resources in such
a way as to maximize the production or
output of goods and services.
• Any point inside the line indicates an
underutilization of resources than the
economy is capable of using.
• A production possibilities curve reflects the
current
country’s _________production
possibilities as if
frozen
the country’s resources were ________in
time.
However, quantity of resources a country has
constantly changing
is__________________.
If the quantity or
quality of available land, labor, or capital
move
changes, then the pp curve will______.
New
inventions
___________,
immigration can help with growth.
grows economists say that
When the economy ______
the entire production possibilities curve has
“_______to
the right.” And if a country’s
shifted
population ages, becomes __________
unhealthy or less
educated, then the curve would shift to the____.
left
Resources and Technology
• A country’s resources
________include its land and
natural resources, its work
_____ force, and its
physical and human capital. Both human
technology and physical capital reflect a vital
_______
ingredient – technology. Countries have
different ways to produce items, each
using different technology, or know-how.
Economist asses each country’s level of
technology, and resources which
ppc
determine its _______.
rain forests are areas of thick vegetation
• Tropical ____
found in equatorial altitudes around the world.
These forests contain an enormous diversity of
plant and animal life. Most rain forest areas,
_____
such as the Amazon Basin, are part of _________
Developing
countries. In many cases these nations hope to
exploit the land for economic growth. Groups
______
that want to protect and preserve the environment,
however, point to the ecological hazards of
clearing this land and developing it for settlement
commercial
or for _________uses,
such as mining.
• Illustrate the impact of each event on a
PPC
– The computer is invented
– 1 million farm workers remain unemployed for
6 months
– A drought
Buying a car
Safety at any cost
• When you buy a car there are trade-offs.
Economists urge consumers to consider the
trade-offs and opportunity costs of each of their
purchase decisions. For cars they fall into:
• Safety vs. cost and convenience
• Pollution v. size
• Safety v. personal freedom
Choose the right car for your group…chart out the
3 opportunity costs & trade-offs for each vehicle.