SECTION 3
Opportunity Costs
Essential Question:
Define the term Trade Off, Explain what an
Opportunity cost is and why it is so
important to consider when allocating
resources; and describe what a production
possibility curve is and what it can show.
1
SECTION 3
Economic Choices and Decision
Making
What are Trade-Offs
Trade-offs are the alternative choices people
face in making an economic decision.
Ultimately, once an Economic Actor makes
a decision about how to utilize a scarce
resource, the options that they did NOT
choose are all trade-offs
2
SECTION 3
Economic Choices and Decision
Making
Decision Making Grid (Do Not Copy)
1.) Copy down the table on the whiteboard
2.) In each of the three categories, give each
restaurant a score from 1-5 with 1 being the worst
and 5 being the best. No two restaurants can have
the same score!!!
3.) Add up the scores from each category and write
the total in the 4th column
4.) If absent, copy chart from a neigbor’s notes
3
SECTION 3
Economic Choices and Decision
Making
Opportunity Cost
Opportunity Cost is expressed in the book as
the second best option not selected.
Example: If McDonald's is your first choice,
and Burger King were your second choice;
the Opportunity Cost of getting McDonald’s
with your resource (money) is giving up the
opportunity to get Burger King
4
SECTION 3
Economic Choices and Decision
Making
Opportunity Cost (Cont.)
O.C. is a way of describing the careful
thoughts that go into making choices that are
impacted by Scarcity. You need to look at
resources used, and potential consequences
suffered (even if in the future).
5
SECTION 3
Opportunity Costs
Production Possibility Curve:
A graph showing the combinations of products that
a company can use with the same amount of a
given resource (helps company answer 3 Q’s)
PPC’s make two important assumptions
Technology and Resource quantity don’t change
Resources are being used efficiently (not wasted)
Future PPC’s can change if A.) Technology
changes or B.) If factors of production
(resources) change.
6
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