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Choices, choicesEQ: What do we give up when we make a choice? How can we measure what we gain and lose when we make choices?
Warm-up:_____ L
1. ____________________ is the study of how society uses its limited resources (explained by the central problem of _____________). In the U.S., we have a _________________ economy--decisions are made by individuals.
2. Give a real world example of each of the following factors of production:a. Landb. Laborc. Capitald. Entrepreneurship
utility- the satisfaction gained from consuming a good/service or taking an action
opportunity cost- value of the next best alternative
marginal utility- extra satisfaction that you gain from one additional unit
law of diminishing utility (or law of diminishing of returns)- As the Quantity of a good consumed increases, marginal utility decreases
What we give up...
An example...Very High Utility High Utility Low Utility Negative Utility
(We’ll discuss!)
___L: Come up with your own example!
Production Possibilities Frontier (PPF)--An economic model in the form of a line on a graph that shows how an economy might use its resources to produce 2 goods
Measuring our gains and losses...
PPFs are used in 4 ways:A. analyze
opportunity costsB. analyze efficiency C. Measure changes in
productivityD. changes in the economy
a. what is the opportunity cost of increasing wheat production by 200 pounds by moving production from Point B to Point C?
b. What is the opportunity cost of increasing wheat production by 200 pounds by moving production from Point C to Point D?
c. Why might the opportunity cost vary so greatly?
d. Plot Point F at 800 pounds of wheat and 800 computer chips. How could this economy move production to Point F?
Ex. wheat v. computer chips
1. What is the primary goal of a business or company? Use an example to illustrate your answer.
2. What are some major challenges in designing a zoo?
___L: transition (more choices)
ZoolinomicsThe Economics of Zoo Keeping
Sorry, big guy! You didn’t make the cut!!
Instructions1. Glue Zoo handout to 56L-->D-H2. You and your fellow zookeepers are starting a new business...you are opening
a zoo! 3. Remember the Purpose is to make money and earn (and maximize) a profit.4. You will have to decide which animals to include in your zoo, but space is
limited.5. You have 25 acres on which to build your zoo6. Each type of animal requires a different amount of space, so you must choose
which animals to put in your zoo. Remember, you need a least one male and one female of each animal so they can reproduce.
7. With your fellow zookeepers, chose which animals to put in the zoo. 8. Check your instruction sheet for the amount of room each animal requires.
What do we need to do?As a group, take a large piece of paper and use a marker to show the layout of your zoo. The paper represents 25 acres. Once your group has decided what animals to include, how many of each animal, and calculated how many acres are to be used for each one, cut out the animals you have chosen and glue it to its respective enclosure.
Remember...you want to make money!Complete the discussion questions together (on separate sheet of paper or side 2 of your zoo). Make sure that ALL names are on it.
Discussion Question:
Did every animal make it into your zoo? Why or why not?
Scarcity necessitates choices
It was limited by the space of the zoo, it would have taken almost twice the land to fit every animal in the zoo.
If the issue of scarcity did not exist then we could fit everything that we wanted in the zoo. Scarcity again shows to be the basic economic problem.
Discussion Question:
Did you include a turkey or a cow in your zoo? Why or why not?
Benefits vs. costsNo group included cows. This is most likely because cows are not relatively scarce, although they are limited, and they do not have a strong demand. You would not be willing to give up a third of an acre for the very little benefit that you would receive. This is called cost/benefit analysis. The opportunity cost of three cows is 1 acre. Economics decisions are cost/benefit decisions.
Discussion Questions:
Why didn’t you have a zoo with only monkeys?
Diminishing marginal benefit:
Monkeys are cool. People will pay to see monkeys, but just like with any “good”, the more you have of them the less each additional monkey is worth. I like ice cream, but the 2nd scoop is always better than the 3rd, 4th and 5th scoop. The more I consume, the less I benefit from each additional unit. This is understood in economics as the law of diminishing marginal benefit (or utility).
Discussion Question:Which type of elephant did you choose? Why did you choose the type you did and not the other?
Benefits vs. Costs, again...Though the benefit of having an African elephant might have been higher, it was possible to get an Asian elephant for one third of the cost. It is not always possible to pay the higher cost even though the benefits may be better.
Discussion Question:What was the last animal to make the cut for your zoo?
Marginal analysisMarginal - on the edge. Economic decisions are marginal decisions because man as a rational being always rationalizes decisions. Marginal also refers to additional.
Discussion Question What was the animal that just missed the cut for your zoo?
Opportunity costOpportunity cost is the opportunity lost(the next best alternative) When you had to make a choice fro the last animal you had to get an animal for the loss of another.
Discussion Question:Did everyone in your group agree to include the same animals?
Would everyone in your group have made the same choices if they had built the zoo alone?
Social benefits versus individual benefitsNot everyone has the same preferences. Some members of your group may really love turkeys, yet had to sacrifice this preference to satisfy the desires of the group. What's best for the individual is not always best for society.
In economics terms, the private benefit of certain behaviors sometimes differs from the social benefit. This may lead to what are known as market failures in economics, which arise when the private behavior of individual consumers or producers leads to socially undesirable outcomes. Second hand smoke, air pollution, traffic, and even global warming are examples of such market failures.
