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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
• Exchanging one thing for the use of another is

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
• 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?