GETTING DOWN TO Business: Scarcity and opportunity costs - PowerPoint PPT Presentation

About This Presentation
Title:

GETTING DOWN TO Business: Scarcity and opportunity costs

Description:

Questions: Does Bill Gates have to deal with scarcity? What about the United States Government? Is it possible to eliminate people s wants? – PowerPoint PPT presentation

Number of Views:154
Avg rating:3.0/5.0
Slides: 13
Provided by: Own67
Category:

less

Transcript and Presenter's Notes

Title: GETTING DOWN TO Business: Scarcity and opportunity costs


1
GETTING DOWN TO Business Scarcity and
opportunity costs
2
Questions
  • Does Bill Gates have to deal with scarcity?
  • What about the United States Government?
  • Is it possible to eliminate peoples wants?

3
The Two Paths of Scarcity
  • Because we know scarcity exists, there arises two
    distinct consequences
  • 1.) The need for a rationing device
  • 2.) Competition

4
What is a rationing device?
  • A rationing device is a way to decide who gets
    what amount of available goods or resources (add
    to your definitions list).
  • Obvious Example MONEY!!!
  • However, if money didnt exist, do you think
    people would develop an alternative rationing
    device?

5
Competition
  • We live in a competitive world
  • Grades, sports, attention, more friends, nicest
    caretc.
  • What is one thing you are competitive about?
  • Draw a flow chart showing the two paths of
    scarcity.

6
Opportunity Costs
  • Add this to your list of definitions
  • Opportunity Costs the most valuable thing you
    give up when you make a choice (the next best
    thing).
  • It can only be 1 thing!!!
  • Trade-offs are basically the same as opportunity
    costs (when I choose one thing over the other, I
    am giving something up)

7
Opportunity Costs Continued
  • Opportunity Costs change the way people behave.
  • Example Ice Cream and cookies
  • Everyone knows that I love cookies. If my only
    dessert option was ice cream, most likely I would
    choose that. However, given the choice, I would
    choose cookies over ice cream every time. The
    opportunity cost of choosing ice cream is loosing
    out on cookies.

8
The Importance of Good Information
  • We talked in class today about how important it
    was to have all the information before making a
    decision.
  • When one party holds more information than
    another, in economic terms, we call this
    asymmetric information (write that down in your
    definition list).

9
Examples of Asymmetric Information
  • The Used Car Salesman A used car salesman wants
    to fetch a high price for a quality used vehicle.
    However, because the buyer doesnt trust the
    salesman, and doesnt know all of the information
    about the car, the buyer offers a much lower
    amount than the salesman is willing to accept,
    and there is no deal.

10
Insurance
  • Insurance companies must always work with
    asymmetrical information. When offering car
    insurance, there is simply no way to know for
    sure whether one driver is a safe driver or not.
    Therefore they must charge a higher price than if
    they could divide the good and bad drivers.

11
Examples in Real Life
  • Think of a time in your life when you either had
    more information than a person you were involved
    with, or someone withheld important information
    from youhow did that impact your decision?

12
Quiz Time!!!
  • True of False
  • Even rich people must deal with scarcity.
  • Scarcity only ever takes one path.
  • Money is an example of a rationing device.
  • We live in a competitive world.
  • Opportunity costs are basically the same thing as
    trade-offs.
  • There can be multiple opportunity costs.
  • Asymmetric information is when everyone is on the
    same page.
Write a Comment
User Comments (0)
About PowerShow.com