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Economic Choices

To choose or not to choose

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Economic ChoicesWhy do we have to make choices?

because of scarcity, we can not have everything we want

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Economic ChoicesWhat makes choosing difficult?some of our choices are in direct conflict with each other

-ex. society wants to drive big

SUV’s but they also want to use less gas

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Economic ChoicesWhat are trade-offs?the choice between alternative uses for a given quantity of a resource

ex. Friday night we want to go to the Jamboree and go to a concert. They are both at the same time. How do we decide?

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Economic ChoicesWhat is opportunity Cost?real economic cost of a good or service produced measured by the value of the sacrificed alternative

this is the idea of comparing the two choices to find out what is lost and what is gained

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Economic ChoicesWhat is opportunity Cost?we often do this at a subconscious level

ex. we do not stand in the cafeteria and right all the pros and cons of the burgers or the salads

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Economic ChoicesWhat are the three basic economic questions?

1. What to produce?

• this is done in the free market

• this determines what mix of goods and services will be allocated

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Economic Choices1) What to produce? (continued)

ex. The milk vending machine

-Chocolate

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Economic Choices2) How to produce?what method of production

-does it need to be fast/or mass produced/does it need to be a very high quality

-what combination of resources are needed

-how will the infrastructure be used

-the stock of an economy’s capital

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Economic Choices3) For Whom to produce?This determines how much of what is produced

-ex. Porsche Carrera GT $440,000

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Economic ChoicesWhat role does culture play?

This determines what is important or valued by the society

-ex. Clean air

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What are society’s economic goals?1) Efficiency

-getting the most out of our resources

-using the least amount of resources to make the most

-use limited resources for the most important purposes

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1) Efficiency (continued)-By improving technology we should be increasing efficiency

-ex. Japan following World War II dumped all of their technology development into civilian areas. They became a world leader in efficiency.

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What are society’s economic goals?

2) Stability

The avoidance of rapid changes in the general price level of goods or services

This should reflect production costs and demand for the item

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What are society’s economic goals?

2) Stability (Continued)

Inflation, the quick continuous rise of the general price level, destroys price stability

This is caused by sudden changes in the country or world

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What are society’s economic goals?

3) Full employment

This is nearly everyone that wants to work has a job

In practice an unemployment rate of around 4-5 % is considered full employment

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What are society’s economic goals?

4) Growthall the other factors contribute to growth

this is an increase in the production capacity of the economy

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What are society’s economic goals?

4) GrowthThere are many theories on how to facilitate growth

1. decreasing the deficit2. increasing tax breaks

for new businesses3. improving the

countries infrastructure

4. more government spending