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Economics Chapter One

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Title: Economics Chapter One Author: donohue Last modified by: donohue Created Date: 9/15/2009 12:03:21 AM Document presentation format: On-screen Show (4:3) – PowerPoint PPT presentation

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Title: Economics Chapter One


1
Economics Chapter One
  • Section 2 Trade-Offs

2
Trade-Offs
  • Exchanging one thing for the use of another is
    called a trade-off.

3
The Cost of Trade-Offs
  • The result of a trade-off is what you give up in
    order to get or do something else. There is a
    cost involved in the trade-off it is called
    opportunity cost.
  • Ex- Maybe you have a job, and maybe that job
    requires you to work at night. What if you have
    an economics test on Friday, but the boss asks
    you to work Thursday night? You must choose. If
    you choose to work, you are trading off your
    chance at a good grade (the opportunity cost),
    but if you decide to study, you are trading off a
    nights wages (the opportunity cost).

4
Considering Opportunity Costs
  • Before you make any economic decisions, you must
    know and evaluate the trade-off you are about to
    make and the resulting opportunity cost. The
    trade-off is the choice you make the opportunity
    cost is the next best alternative that you are
    giving up when you make that choice.)

5
Federal Govt. and Opportunity Cost
  • The Congress always has to make choices about how
    to best spend the tax revenue the government
    collects.
  • Congress must way the opportunity costs of the
    trade-off they make.
  • Ex- If Congress votes to spend 220 Billion on
    building new highways, that means that there is
    220 Billion fewer dollars to spend on other
    projects, i.e. schools, hospitals, etc.

6
Production Possibilities Curve
  • Graph showing the maximum combinations of goods
    and services that can be produced from a fixed
    amount of resources in a given period
  • Ex- You have 20 hours to make as much jewelry as
    possible with 60 ounces of silver and a cup of
    beads. The table below represents what you can
    make and what you trade off.

7
Pairs of earrings of bracelets
5 0
4 2
3 4
2 6
1 8
0 10
8
The Classic Example
  • Refers to the dilemma of the federal government.
    How much to spend on military defense and how
    much to spend on civilian goods. Its commonly
    referred to as Guns v Butter

9
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10
Trade-Off in Amazon Today- Opportunity Cost May
Be Future
  • An area to 5,ooo soccer fields is being
    destroyed in the Amazon everyday. The land is
    cleared to grow crops to sell for a profit. The
    wood is used to make hardwood floors to export
    all over the world. Should we be worried?

11
  • How can a trade-off you make today affect your
    future?
  • What trade-offs do you see yourself having to
    make in the near future?
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