How Economist Think 9/19/11
Scarcity forces everyone to make choices
What shapes the economic choices people make?
Incentives-are benefits offered to encourage people to
act certain ways.
Examples:
Utility-is the benefit or satisfaction gained from the use
of a good or service.
-Utility could be hunger, entertainment, happiness,
comfort, education, health…..
Economize-to make decisions according to what you
believe is the best combination of costs and benefits.
Economists believe that humans make decisions based
on their rational self-interest.
Rational Self Interest- people look for and pursue
opportunities to increase their pleasure, happiness, or
How Econ Thinks Per 8 Page 1
opportunities to increase their pleasure, happiness, or
satisfaction from consuming a good or service.
Every choice involves a cost
-Cost can be in the form of money, time, or something
else you value.
"No Free Lunch"-you might be getting the food for free
but there is still costs involved.
Examples:
Go out to dinner or go to a movie?
Dinner
Costs:
Benefits:
Movie
Costs:
Benefits:
Every time you spend your income on a good or a
service, you give up the ability to buy something else.
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service, you give up the ability to buy something else.
Economists call this Opportunity Cost.
Opportunity Cost-is the value of your second choice,
the choice you gave up to have your first choice.
Example: Take Notes or Take a Nap
Exit Question: Give an example of opportunity cost in a
choice/decision you recently made?
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