Economics Chapter 1 Section 2
Why do decisions involve trade-offs?
Resources are limited
What are "guns or butter" decisions?
They are made by countries when they choose to produce more or less military or consumer goods.
How does an opportunity coat differ from a trade-off?
An opportunity cost is the most desirable option of all those available, but there may be more than one trade-off
How does opportunity cost vary?
Based on what is being given up by making the decision.
In what way are trade-offs and opportunity cost alike?
Both are choices given up in favor of another choice.
What does thinking at the margin help with?
Decision making
What does thinking at the margin help compare?
Helps by pointing out opportunity cost and benefits.
Who makes trade-offs?
Individuals, businesses, and governement
Why does opportunity cost vary?
It depends how much each individual is willing to give up in order to receive their ideal benefit
How does think at the margin change the decision-making process?
It will make a person think- How should I spend the next hour? How should I spend the next dollar?
The most desirable alternative given up as the result of a decision.
Opportunity Cost
Deciding whether to do or use more or less of some resource.
Thinking of the Margin
Alternatives that people give up when they choose one course of action over another.
Trade-Offs