Warm Up
9/7/11
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
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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.
Trade-offs are all the alternatives that we give up whenever
we choose one course of action over others.
(Examples: going to the movies)
The most desirable alternative given up as a result of a
decision is known as opportunity cost.
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?