EVERY CHOICE HAS A COST'

1
EVERY CHOICE HAS A COST.

• Principle 2 Every choice has a cost
• Standard 12.1 Students understand common economic
  terms and concepts and economic reasoning
• Section 1. Examine the causal relationship
  between scarcity and choices
• Section 2. Explain opportunity cost

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Benefit/Cost Analysis

• Principle 3 Benefit/Cost Analysis is useful
• Standard
• Grades 9-12 Historical and Social Science
  Analysis skills
• Section 2. Understand the use of benefit/cost
  analysis as an analytical tool the economists use
  to get the most benefit from limited resources
• Section 6. Students conduct cost/benefit
  analyses.

3
Decision Making (Benefit/Cost Analysis)

• Five Steps

4
What you should know and be able to do

• Use the decision-making apron to analyze
• a birthday party
• the prom
• earning a high school diploma or dropping out
• peace in the middle east

5
Scarcity and Economics

• The problem our resources are insufficient to
  satisfy all of our wants
• The goal to maximize wealth (to get the most and
  the best from our scarce resources according to
  our personal values)
• The method benefit/cost analysis

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Vocabulary

• Goal something that a person wants to have or
  do
• Decision a process of identifying the best way
  to achieve a goal
• Alternatives opportunities from which people
  can select, options
• Advantages good points about an alternative
• Disadvantages bad points about an alternative
• Choice the alternative selected
• Opportunity cost the best alternative not
  selected, the opportunity given up in a decision

7
The importance of alternatives

• Power an impressive list of alternatives in
  terms of quantity and quality
• Poverty few good alternatives
• Your job in school build your human capital so
  that you will have power

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The Four Steps

• State the goal and identify the resources
  available to achieve the goal.
• List alternative uses of the resource to achieve
  the goal
• Identify the advantages and disadvantages of each
  alternative
• Identify the choice and the opportunity cost of
  the choice

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THE APRON
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Things to note

• There is no such choice as a free choice every
  decision has an opportunity cost.
• Dont confuse alternatives with choices each
  decision has only one choice
• Dont confuse disadvantages with opportunity
  cost. Each decision has only one cost and it is
  the best alternative that was not chosen what
  you would have done.