OPPORTUNITY COST MR MARINELLO CHIPPEWA VALLEY FALL 2012

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OPPORTUNITY COST MR. MARINELLO * CHIPPEWA VALLEY FALL 2012

OPPORTUNITY COST MR. MARINELLO * CHIPPEWA VALLEY FALL 2012

WHAT IS IT? Opportunity Cost The value of something that you give up on

WHAT IS IT? Opportunity Cost The value of something that you give up on order to get something else you wanted.

HOW DO PEOPLE Incentives MAKE • Benefits or punishments offered ECONOMIC to encourage people

HOW DO PEOPLE Incentives MAKE • Benefits or punishments offered ECONOMIC to encourage people to act in DECISIONS? certain ways. Utility • Benefits or satisfaction gained from the use of a good or service.

TWO FACTORS THAT POWER OUR CHOICES: MOTIVATIONS FOR CHOICE People weigh the costs and

TWO FACTORS THAT POWER OUR CHOICES: MOTIVATIONS FOR CHOICE People weigh the costs and benefits and make a purposeful choice NO FREE LUNCH Every choice involves costs.

LET’S PUT THIS INTO PRACTICE Christy has been offered a full time job for

LET’S PUT THIS INTO PRACTICE Christy has been offered a full time job for the whole year. But she wants to do some traveling. Option #1 Work for 6 months and spend other 6 months traveling. Opportunity Cost: The income she would have earned at her job.

LET’S PUT THIS INTO PRACTICE Christy has been offered a full time job for

LET’S PUT THIS INTO PRACTICE Christy has been offered a full time job for the whole year. But she wants to do some traveling. Option #2 Work for the whole year. Opportunity Cost: The experience of traveling.

OPPORTUNITY COST the value of the next-best alternative, or what is given up to

OPPORTUNITY COST the value of the next-best alternative, or what is given up to get what is most wanted.

LET’S PUT THIS INTO PRACTICE Dan’s boss asks him if he wants to work

LET’S PUT THIS INTO PRACTICE Dan’s boss asks him if he wants to work an overtime shift and earn double his wage, however he would miss tonight’s episode of The Jersey Shore. Option #1 Work the extra hour. Opportunity Cost: He’d miss the smack down that Deena puts on Snooki.

LET’S PUT THIS INTO PRACTICE Dan’s boss asks him if he wants to work

LET’S PUT THIS INTO PRACTICE Dan’s boss asks him if he wants to work an overtime shift and earn double his wage, however he would miss tonight’s episode of The Jersey Shore. Option #2 Go home and watch Snooki puke all over Jwoww. Opportunity Cost: The cash and the self respect of his future self

MARGINAL BENEFIT VS. MARGINAL COST The additional increase or decrease of something brought on

MARGINAL BENEFIT VS. MARGINAL COST The additional increase or decrease of something brought on by a one unit increase of something else. Marginal Benefit: how much does your utility (happiness) increase with eating an additional piece of pizza? Marginal Cost: how much do your costs increase by producing an additional unit

MARGINAL BENEFIT OF STUDYING

MARGINAL BENEFIT OF STUDYING

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