Essential Questions for Rational decision-making

• Why should people weigh the advantages and disadvantages of different alternatives when making decisions?

• What does it mean to be rational?• What methods can we use to help us make

our choices more rationally?• How does self-interest influence human

decision-making?

Trade-offs

• Exchanging one thing for the use of another is called a trade-off

• Trade-offs involve opportunity costs, or the loss of one alternative when you choose another

• Opportunity cost by definition is the value of the next best choice

• Considering the opportunity cost can help people make decisions

OR

PARTY

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QuickTime™ and a decompressor

are needed to see this picture.

QuickTime™ and a decompressor

are needed to see this picture.

QuickTime™ and a decompressor

are needed to see this picture.

Production Possibilities Curve

• The production possibilities curve shows the maximum combination of goods and services that can be produced from a given amount of resources

• Using a PPC, a producer can decide best how to use resources.

The production possibility curve demonstrates that:

1. There is a limit to what you can achieve, given the existing institutions, resources, and technology.

2. Every choice you make has an opportunity cost. You can get more of something only by giving up something else.

Production Possibilities

• Graph #1• Draw a PPC that illustrates the

maximum combination of two goods.• Indicate on the graph a point of

inefficiency and label point “A”.• Indicate a point on the graph of a

production impossibility and label point “B”.

Production Possibilities

• Graph #2• Draw a PPC that illustrates the

maximum combination of two goods.• Label the PPC “PP1”.• Illustrate the shift that would occur in the

PP if a worldwide epidemic took place. • Label the new PPC “PP2”

Production Possibilities

• Graph #3• Draw a PPC that illustrates the

maximum combination of two goods.• Label the PPC “PP1”.• Illustrate the shift that would occur in the

PP if new innovations took place in the production of goods and services.

• Label the new PPC “PP2”

Production Possibilities

• Graph #4-6• Draw a PPC that illustrates the

maximum combination of two goods.• Label the PPC “PP1”.• Illustrate a shift either right or left and

provide an explanation that would cause the shift in the graph

• Label the new PPC “PP2”