Economic Choices and Decision Making Macdonald Economics Making

Economic Choices and Decision Making Macdonald Economics

Making Choices n n B/c resources are scarce and ppl have unlimited needs, there is a need to make choices or decisions To become a good decision maker, you need to identify the problem and analyze alternatives

Decision Making Grids n n n First thing we must recognize in making decision is that there is always another choice. Alternative choices are called trade-offs. A decision making grid may be used to help analyze trade-offs and help people make the best choices.

A decision making grid lists all possible alternatives to a problem then analyzes them based on a set of criteria. The answers are analyzed in order to help make the best decision

Making Good Choices n Imagine Nathan has a job delivering newspapers. He has $50 to spend this month in the best possible way. He makes his decision about how to spend his money based on five categories that are important to him.

Alternatives Criteria Cost less than $50 Durable Will parents approve Future expense needed Several CDs Concert Tickets Yes Yes Yes No No Yes CD Player Yes Yes Jeans Yes Yes No Going out to eat Yes No

Alternatives Criteria Cost less than $50 Durable Will parents approve Future expense needed Several CDs Concert Tickets Yes Yes Yes No No Yes CD Player Yes Yes Jeans Yes Yes No Going out to eat Yes No

Decision Making Grid n Imagine you received a gift of $100 for your birthday. Create a decision making grid analyzing how to spend your money. Create criteria that are meaningful to you.

Opportunity Cost n n Ppl generally thinbk of cost interms of dollars and cents Economists think of cost more broadly as a value Opportunity Cost is the value of the next best alternative to a choice in terms of money, time or resources For Nathan, the opportunity costs of buying jeans was the next best option of CDs or a player

n n n Everything has an opportunity costs The cost of having an after school job is spending less time with friends, family or on school work The costs of doing economics homework is less time watching tv, sleeping, etc.

Opportunity Cost Practice n n n 1. 2. Lisa has two choices for a summer job Choice A - Stater Bros @ $10. 25 / hour Choice B – Landscaping @ $ 8. 25 / hour with her friends What is the opportunity cost of working at Stater Bros? What is the opportunity cost of working with her friends?