Trade offs

1
Trade offs

• All the alternatives we give up when we choose
  one action over another.
• Parents-day care John-college
• Individually- work vs sports
• Business- farmers- choose to grow corn vs
  watermelons. Manufacturer- chooses to produce
  chairs- instead of tables or desks

2
Trade Off Opportunity Cost

• Society/Trade offs- Government and countries
  GUNS vs BUTTER?
• Allocation of resources
• Opportunity Cost- next best desirable alternative
  given up in a decision
• Family computer vs vacation.
• Decision grid- sleep late vs up early to study
  WHICH HAS MOST BENEFIT?

3
Thinking at the margin

• Considering how much more or how much less to do
  on a given decision.
• Karen with sleep- is it all or nothing?
• Alternative decision?
• Weighing multiple alternatives in thinking at the
  margin.
• Margin- looking at possibilities, weighing
  options and choosing most desirable option.

4
Costs/Benefits at the margin

• Government and budget
• GUNS vs BUTTER
• TAXES vs SPENDING CUTS
• Cost/Benefit analysis
• Usually what we do when we make decisions- Op
  costsacrifice Benefitsgains
• Sacrifice vs gains-