Journal

1. What is the difference between Microeconomics and Macroeconomics?

2. What term refers to the fact that we have limited money and resources but unlimited wants?

3. List the 3 Basic Economic Questions.

ANSWERS

1. Microeconomics focuses on small units such as individuals and businesses. Macroeconomics looks at the economy of an entire country.

2. Scarcity

3. WHAT to produce?

HOW to produce?

FOR WHOM to produce?

1. Are diamonds scarce? Why or why not?

2. Is water from the water fountain scarce? Why or why not?

ANSWERS

1. Yes, because diamonds are in limited supply.

2. No, because fountain water has (basically) unlimited supply.

TRADE-OFFS & OPPORTUNITY COST Trade-offs: other choices you could have

made when you spend your $ or time. What are you giving up when you make a

choice? Opportunity Cost: the cost (value) of the

next best alternative use of $, time, or resources. Opportunity cost is the cost of a trade-off

Thomas and Nichele

HOT DOGS: $1.50 HAMBURGERS: $2.50 NACHOS: $2.00

TRADE-OFFS

Morris is on the game show “Let’s Make a Deal.” The host offers her a choice between what is behind curtain A, curtain B, or curtain C (She doesn’t know what’s behind any of the curtains)

What’s the trade off(s), if she picks curtain B? What’s the opportunity cost(s) of picking curtain

B?

OPPORTUNITY COST

Time spent also has an opportunity cost. Example – if you could have earned $50 for

working in the morning, but oversleep, what is the opportunity cost of sleeping?

OPPORTUNITY COST

Suppose there are 3 things you could do on some Sunday afternoon. You can only do one of these three things: (1) do your homework, which you value at $50, (2) visit with your friends, which you value at $40, (3) sleep, which you value at $30.

What is the opportunity cost of homework?

OPPORTUNITY COST

Layo owns a small shoe store and has no employees. On an average day he takes in $200 in sales, and that’s about what he expects to make this Friday. Morris is offered an opportunity to go on a day-long competition on a local radio show on Friday. If he goes on the show he will have to close here shop, and will lose any sales he would have made for the day. He will compete against 100 other listeners, and the winner will receive $10,000. The game is based entirely on luck, so each of the 100 listeners has an equal opportunity of winning.

OPPORTUNITY COST

What is the trade-off facing Layo? If he goes on the show, what is his

opportunity cost? Do you think Layo should go on the radio

show? Why or why not?

Quiz on Monday!!! What is economics? Micro-? Macro-? Scarcity 3 Economic Questions 4 factors of production (CELL) Trade-Offs / Opportunity Costs