Random FACTS of the Day
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"Thirty-four percent of the adult population (18 and over)
had degrees or certificates above the high school level in
2001."
Sixteen percent have bachelor's degrees. (undergraduate,
four-year program)
Seven percent have associate's degrees (two-year program
of study)
Sixteen percent have less than a high school diploma.
Average monthly earnings of full-time workers with a
professional degree = approximately $8,000.
Average monthly earnings of full-time workers who did not
complete high school = $2,000 per month.
Chapter 18, Section 2
Making Economic Decisions
Main Idea
► Trade-offs
made!!!
are present any time a choice is
I. Trade-Offs
A. Economic decision making requires
that we take into account all the costs
and all the benefits of an action.
B. Trade-Offs- Exchanging one thing
for the use of another.
***Ex: When you buy a product, you
exchange money for the right to
own that product rather than
something else you could have at
the same price. ***
***People, businesses, and societies
make trade-offs every time they
choose to use their resources in one
way and not another.***
***Ex: More money spent on
education means less money for
defense and research!***
C. Opportunity Cost- what you can’t buy
or do when you choose to do or buy
something else.
Ex: If you buy a brand new car and pay
$950 a month you cannot afford to
buy a brand new boat at $1200 a
month.
OR
D. Opportunity cost includes more than just
money. It includes discomforts and
inconveniences linked to the choice made.
Ex: If you decide you are going to
clean your house, not only do you
have to spend money to buy the
products to clean your house, but you
are spending time cleaning when you
could be doing something else, like
going to the beach!
E. All businesses have fixed and variable
costs.
F. Fixed Costs: Always the same
1. Rent = 650 per month
G. Variable Costs: Expenses that change
1. Electricity= $200, $303 Etc..
2. Water = $55, $45 Etc…
H. Fixed costs + Variable Costs = Total Costs
*** To find average total cost, divide the
total cost by the quantity of the product.
Total Cost- $4,000
Staplers Made- 1,000
Average Cost- $4 each
I. Marginal Cost- Extra cost of producing
one additional unit of output.
***If it costs $500 to add a headrest dvd
player to your new vehicle the marginal
cost is
.
***Businesses measure the total
revenue and marginal revenue to
decide how much of output will
create the greatest profits***
J. Marginal Benefit- The additional
benefit associated with an action.
II. Cost Benefit Analysis
A. Cost Benefit Analysis- Economic
model used to compare marginal costs
and marginal benefits of a decision.
***You should choose an action where
the benefits are greater than the
costs***
Page 413!
Mini Quiz!!! Edwin Starr- War
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Give an example of a fixed cost.
Give an example of a variable cost.
Create an example of a trade-off.
Create an example of opportunity cost.