04 tues oppo costs choices

Bellringer - in your notebook1. Why did you choose to come to school today?

2. If you weren’t here right now what would you be doing?

Opportunity Cost• Next best option• Example: What you gave up to be here• “I don’t get paid to be here”.

What is economics?• Study of how people

make choices

• You made a choice by coming to class today

• But that choice also has a cost

Economics• People face trade-offs

• Hundreds of choices each day

• Every choice means you refuse something else

• Examples?

What is economics?economists

Alan Greenspan

Ben Stein

Greg Mankiw

Janet Yellen

Economics as a field

Economics

FinanceIndustrial OrganizationSociologyMarketingPublic ChoiceResource Management

Cousin to Accounting

Combines, history, math, psychology, political science

Economist• A person who studies Economics• Analyze, explain, predict

Ben Stein in Ferris Buhler’s Day Off

Show Dangerfield clip

Economists• Study how

people make choices

• Influential but not always famous

• Only 1 US president with econ degreeAlan Greenspan

Ben Stein

Choice this morning

• Get up when alarm goes offOR

Hit the snooze

Choice #1Get up when alarm goes off

Choice #2Snooze for 10 more minutes

At least 2 benefits

Check the one you did today

Benefits refused

Choosing is refusing

• Your next best option:• Opportunity cost

• All choices involve cost

4. Household example5. High school example6. Government example7. Other example

Problem for humans• People have unlimited wants

• People have limited resources to get those wants

• We call this problem: Scarcity

Opportunity Cost• What you give up to do something• “The next best option”• For example: If you have $20 in your pocket

and you want to take your BF/GF to the movies, then you won’t have any money left for a new $20 shirt

Opportunity Costs of Going to College

Source: US Bureau of Labor Statistics

Assuming a person works for 45 years, how much more will the person with a bachelor’s degree make over a person with only a high school diploma?

What’s the other problem for people without high school diplomas?

52 weeks in 1 year

Assuming a person works for 45 years, how much more will the person with a bachelor’s degree make over a person with only a high school diploma?Without: $595 X 52 = $30,940/yr X 45 = $1,392,300With Degree: $962 X 52 = $50,024/yr X 45 = $2,251,080

On average, is it worth it?What’s the other problem for people without high school diplomas?

It depends!

In millions of dollars; based on 1997-1999 work experience

Source: US Bureau of Labor Statistics

Why is this important?

Opportunity Cost• Next best option• Example: What you gave up to be here• “I don’t get paid to be here”.

Tell your partner1. Describe a time you received something for

“free”(What was it, where was it, when was it, quality?)

There Is No Such Thing as A Free Lunch

• Opportunity Cost

• There is no such thing as a free lunch (or breakfast)

• TNSTAFL

There Is No Such Thing as A Free Lunch

There Is No Such Thing as A Free Lunch

• Opportunity Cost

There Is No Such Thing as A Free Lunch

There Is No Such Thing as A Free Lunch

There Is No Such Thing as A Free Lunch

Example?

In your notesWhat if stuff was “free”?

Create a cost/benefit analysis for each societal choice

1. College is “free”2. Dr. visits are “free”3. Drive on I-10 now $2 each way4. All radio $5/month , like Pandora or

XM5. Music & movie downloads now legal6. Make up one of your own

Benefits Costs

At least 2 At least 2

Opportunity cost worksheet& School supply article

• Due Friday 8/14

• On back of worksheet:• Write 5 questions an economist would ask

about this article, try to use new vocabulary