Transcript Economic Choices

Economic Choices
To choose or not to
choose
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Economic Choices
Why do we have to make choices?
because of scarcity, we can not have
everything we want
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Economic Choices
What makes
choosing difficult?
some of our choices
are in direct conflict
with each other
-ex. society
wants to drive big
SUV’s but they also
want to use less gas
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Economic Choices
What are trade-offs?
the choice between
alternative uses for a
given quantity of a
resource
ex. Friday night we want
to go to the Jamboree and
go to a concert. They are
both at the same time.
How do we decide?
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Economic Choices
What is opportunity Cost?
real economic cost of
a good or service
produced measured by
the value of the
sacrificed alternative
this is the idea of
comparing the two
choices to find out
what is lost and what
is gained
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Economic Choices
What is opportunity Cost?
we often do this at a
subconscious level
ex. we do not stand
in the cafeteria and
right all the pros and
cons of the burgers
or the salads
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Economic Choices
What are the three basic economic questions?
1. What to produce?
• this is done in
the free market
• this determines
what mix of
goods and
services will be
allocated
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Economic
Choices
1) What to produce? (continued)
ex. The milk
vending machine
-Chocolate
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Economic Choices
2)
How to produce?
what method of production
-does it need to be fast/or mass produced/does
it need to be a very high quality
-what combination of resources are needed
-how will the infrastructure be used
-the stock of an economy’s capital
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Economic Choices
3) For Whom to produce?
This
determines how
much of what is
produced
-ex.
Porsche
Carrera GT
$440,000
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Economic Choices
What role does culture play?
This determines
what is important
or valued by the
society
-ex. Clean air
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What are society’s economic goals?
1) Efficiency
-getting the most
out of our resources
-using the least
amount of
resources to make
the most
-use limited
resources for the
most important
purposes
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-By improving
1) Efficiency (continued)
technology we
should be
increasing
efficiency
-ex. Japan following
World War II
dumped all of
their technology
development
into civilian
areas. They
became a world
leader in
efficiency.
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What are society’s economic goals?
2) Stability
The avoidance of
rapid changes in the
general price level of
goods or services
This should reflect
production costs and
demand for the item
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What are society’s economic goals?
2) Stability
(Continued)
Inflation, the quick
continuous rise of
the general price
level, destroys price
stability
This is caused by
sudden changes in
the country or world
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What are society’s economic goals?
3) Full employment
This is nearly
everyone that wants
to work has a job
In practice an
unemployment rate
of around 4-5 % is
considered full
employment
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What are society’s economic goals?
all the other
factors
contribute to
growth
this is an
increase in the
production
capacity of the
economy
4)
Growth
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What are society’s economic goals?
There are many
theories on how to
facilitate growth
1. decreasing the deficit
2. increasing tax breaks
for new businesses
3. improving the
countries
infrastructure
4. more government
spending
4)
Growth
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