Chapter 1 Section 3 Opportunity Costs Objectives Understand

Chapter 1 Section 3 Opportunity Costs

Objectives • Understand why sacrifice is an important element of economic choice. • Identify the assumptions involved in creating a production possibilities curve. • Determine why future production possibilities might differ from current production possibilities.

Scenario • You belong to your school’s Young Entrepreneurs Organization. This coming Saturday evening, the club is holding a fundraiser to earn money for an upcoming trip. As a member, you should attend. A few days before the fund-raiser, however, some of your friends tell you that they have tickets to a sold -out Saturday night concert for your favorite band. They want you to join them,

Continued and have an extra ticket they will sell you for $20. While wondering what to do, the person you have been dying to go out with walks up and asks if you would like to see a movie together Saturday evening. Your head starts to swim. What do you do? You want to do all three activities, but you know you can do only one. Which do you choose?

Suggested Solution Use a decision-making grid Alternatives Benefits Go to fundraiser Go to concert Go on date Trade-offs

Issues • What are some of the environmental problems that exist in the United States today?

Trade-Offs and Opportunity Costs • Choosing among alternative uses for available resources forces individuals to make decisions. • One good is sacrificed for another. • Trade-off-the sacrifice of one good in order to purchase or produce another. • Opportunity cost-the value lost by rejecting one use of resources in favor of another.

Production Possibilities • Production possibilities curves are models of current conditions. • Why might these conditions change? ( because technology and the amount of available resources do not remain constant in the real world, and producers do not always use factors of production as efficiently as possible. )

• Why and how the curve’s “shift to the right’ occur. (When improvements in technology occur or new resources become available, the entire production possibilities curve changes.

Activity • Choose a partner to work with. • One person in the partnership will come and get a piece of poster paper.

Directions • Choose an industry or business and create a production possibilities curve for two products. Each partnership will develop a scenario that would shift the production possibilities curve to the right and create a second graph that shows how the curve has shifted. Next, each group should write a paragraph explaining what changing factors caused the shift.