PPT-Economic Choice Today: Opportunity Cost

Chapter 1Section 2 pages 1217 Section 2 Objectives understand why choice is at the heart of economics explain how incentives and utility influence people economic choices consider the role of tradeoffs and opportunity costs in making economic choices. AAE 320. Paul D. Mitchell. Goal of Section. Overview what economists mean by Cost. (Economic) Cost Functions. Derivation of Cost Functions. Concept of Duality. What it all means. Economic Cost. Economic Cost: Value of what is given up whenever an exchange or transformation of resources takes place. During the holiday season of 1996, a children's toy appeared on Good Morning America. The toy, produced by Mattel, had sat on the shelves with very little sales until it appeared on the show. After the toys appearance, its popularity improved and it became the most sought after product of the holiday season. Unfortunately, Mattel did not anticipate the doll’s popularity, only producing 400,000 units, and were not able provide the product in a timely manner at the store level (over 1,000,000 were in demand). . It is a simplified representation of economic activities, systems, or problems. PRODUCTION POSSIBILITY CURVES. What does the Production Possibilities Frontier (Curve) represent?. Opportunity Cost – what we give up to produce something else. CHAPTER. 3. 3.1 PRODUCTION POSSIBILITIES. Production Possibilities Frontier. Production possibilities frontier. The boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production and the state of technology.. Class Notes: The Handy Dandy Guide. People choose.. All choices involve costs.. People respond to incentives in predictable ways.. People create economic systems that influence choices and incentives.. 2. Previously. Economics is the study of how people allocate their limited resources to satisfy their nearly unlimited wants. . “. Scarcity. ”. refers to the limited nature of . society’s . resources.. Test Review. What is any reward or benefit that motivates people to do something. Incentive. What is a factor or disadvantage that discourages people from doing something?. Disincentive. What is a tool used to choose among alternatives; weighing the cost of a product or service against the benefit(s) it will provide?. Creating Something from Nothing. Opportunity Costs. Opportunity cost is the cost of the next-best alternative. The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently. It is important to keep in mind that opportunity costs are not restricted to monetary or financial costs.. Dr. Greg . Delemeester. Summer . 2011. Economics. Making choices under conditions of scarcity. What stocks should I buy for my portfolio?. How many Whoppers should I eat?. How many hours should I study for biology?. 1. Scarcity. 2. Scarcity. Resources are scarce. You can’t always get what you want so everyone must make choices.. Choices can be dependent on money but also time.. Why do individuals have to make choices? . Learning Intentions. Define the term economics. Explain the term Economic Resources. Identify and outline the Factors of Production. Describe how business use the Factors of Production. Explain how scarcity, choice and opportunity impact on the Factors of Production. Goal of Section. Overview what economists mean by Cost. (Economic) Cost Functions. Derivation of Cost Functions. Concept of Duality. What it all means. Economic Cost. Economic Cost: Value of what is given up whenever an exchange or transformation of resources takes place. , MA. Jonathan Lowell. jlowell@iso-ne.com | 413-540-4658. ISO’s Proposal to Estimate Opportunity Costs for Oil and Dual-Fuel Resources with Inter-temporal Production Limitations. Opportunity Costs . Introduction. The great classical writers such as Adam Smith, Jeremy Bentham and John Stuart Mill considered economics to be a social science in the broadest sense possible. In the 18. th. and early 19.