Quick Write
Thank you for coming to
class today, what were
some other things that you
could have been doing
instead of coming in?
Scarcity, Trade-offs and
Opportunity Cost
The Effects of Scarcity on Decision
Making
Scarcity
Because resources (land, labor, capital)
are scarce (not enough), all societies try
to use their resources as efficiently and
effectively as possible
Productivity
 Everyone in society benefits when scarce
resources are used efficiently
 Productivity: The level of output (goods
or services) that results from a given
level of input (resources)
 When output increases with same
amount of input, productivity increases.
When output decreases with same level
of input, productivity goes down
o
Ex. Nintendo increases output of Wii’s from
100,000 a month to 110,000 a month
Productivity:
 One student was able to complete 2 homework
assignments in 1 hour.
 What’s this students productivity?
When you think of productivity,
think about how much product
they can make with their given
resource
2 homework assignments in 1 hour.
Efficiency
Efficiency: The use of the smallest
amount of resources to produce the
largest amount of output (getting
more for less)
Ex. Arrowhead introduced new bottles that
contains 30% less plastic. Since they are
using less of the resource (plastic), they are
being more efficient.
(Plus, can create more bottles, thus
increasing productivity!)
When you
think of
efficiency;
Think being
efficient
Division of Labor and Specialization
To increase efficiency, some businesses
might divide the labor into simpler tasks.
Division of Labor: dividing the process of
production into specific tasks
Specialization
Specialization: one group, person or thing
that performs one task very efficiently (could
be a business, or even a region or country ie.
Idaho-potatoes, Cali-lettuce, Texas-oil)
Ex. Henry Ford and the assembly line for Model-T cars
cut the time to make a car from a day and a half to 90
minutes and the cost of a car by 50%
Trade-offs and Opportunity Cost
Scarcity forces society to make
choices
Every choice made has a
trade-off, or an alternate
choice that is given up (ex.
stay in or go out at night,
homework or television)
Tradeoffs
 Think The
Price is right
with the
Showcase
Showdown
Opportunity Cost
Opportunity Cost: the value of the next best
choice that you give up
The best opportunity given up when a choice is made
The person has 15
dollars to buy either a
CD or T-Shirt.
The OC of buying either
item, is the item that
they are giving up
Opportunity Cost examples
1.) The opportunity cost of
Ms. J becoming a teacher
is Mr. J becoming a police
officer.
What I chose
What I gave up
Being an officer
was my opportunity
cost.
Ms. J decided against
watching Zero Dark Thirty
and instead watched
Oblivion.
We do
 What could my
opportunity cost have
been in deciding to go to
the movies?


In other words, what else
could I have been doing?
What did I give up by
going to the movies?
 Ms. J decided to buy a
burrito from Chipotle.
What was my
opportunity Cost (OC)
for buying that burrito?
Your turn to practice
 Create 5 opportunity Cost scenarios in your notes.
 Be sure to create the sentence. “The opportunity cost of
________________ was _____________________.
Trade-offs and Opportunity Cost
Opportunity costs are everywhere in life!
Go to college or work, hang out with friends or
study, paper or plastic, the list goes on!
When we choose the thing with the greater
value and give up the other choice with less
value, it is called a Rational Choice
Opportunity Cost
 Everything you do has an Opportunity Cost.
 That’s why “There is no such thing as a free lunch”
(TISNSTAAFL) because by going to the restaurant and
getting that “free lunch,” you are giving up things that you
could have been doing instead.

What else could you have been doing instead of getting that lunch?

Answer the question as “The opportunity cost of eating that free
lunch was….”
Independent Practice
 To practice Trade offs and Opportunity Cost you are
going to create a children’s book that explores these
key economic concepts.
OC Children’s book
 Individually, you will create a children’s book that is 6
pages in length with each page describing an opportunity
cost that your character went through.
 On each page, you must provide a sentence that signifies a
choice.

The teddy bear could have cleaned his room, but instead he decided
to ride a bike.
 Then you must explain the opportunity cost.
 The teddy bears opportunity cost for riding his bike was cleaning
his room.
 You must also illustrate each page appropriately.
Ms. J’s story
 The teddy bear could have cleaned his room last night, but instead he
decided to ride his bike.
 The opportunity cost of riding his bike was cleaning his room.
The teddy bear decided to go down the slide,
instead of flying kite.
 The opportunity cost of going down the slide was
flying his cost.
The teddy bear could have played nice, but chose
to get in a fight
 The opportunity cost of getting in a fight was playing
nice.
Teddy bear could have stayed up and partied, but
decided to go to sleep tonight.
 The opportunity cost of going to sleep was that he
could have partied.
Question 1
What is opportunity cost?
a. Money paid for opportunity.
b. Irrelevant for choices people make.
c. The highest valued alternative given up when a choice is
made.
d. The interest earned on investment.
Question 2
What is your opportunity cost of going skiing?
a. The purchase price of a lift ticket.
b. The amount of money spent on food and drinks in the
lodge.
c. The value of your next highest alternative given up
because of the time and money spent on skiing.
d. There is none, skiing is not a commodity.
Question 3
What does an economist mean when saying “there is no
such thing as a free lunch?”
a. Somebody always has to pay for lunch, even if it is free to you.
b. Even if somebody else buys your lunch, there is an opportunity
cost for your time.
c. This statement is incorrect. If somebody else buys your lunch it
is free to you.
d. Resources are used to make any lunch. What is free to you will
cost somebody else.