Document 252160

Economic choices
We are faced with choices because we
do not have enough productive
resources to satisfy all of our wants and
Economics: the study of how we make
decisions in a world where resources
are limited.
Need or want?
Required for survival
Things we would like to
The fundamental economic problem is
scarcity (when we do not have enough
resources to produce all of the things we
would like to have).
 Have
to take all aspects of
transactions into account
 Ex: you trade money to buy a
 Opportunity
cost is the next
best thing that you had to give
up for the choice you made
(includes money and
 Fixed
costs do not change no
matter how much is produced
 Variable costs change w/the
amount produced
Costs +
Costs=Total Cost
 Marginal
cost is the cost of
producing one more unit of
 Businesses look at total and
marginal cost to determine
final cost
Cost-Benefit analysis
 Econ.
model that compares
marginal costs and benefits
 Benefits should outweigh the
costs when making decisions
Your role in the economy
 U.S.
has a market economy
 Choices you make affect
choices businesses make (like
what to make or how much to
 Market
economies are based
on capitalism and free
 Incentives try to persuade
people to make certain
economic decision
Making wise choices
 Rational
choice involves
consumer’s perceptions
 Benefits society by making the
best use of scarce resources