Choices, choices

EQ: 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.
a.
b.
c.
d.

Give a real world example of each of the following factors of production:

Land
Labor
Capital
Entrepreneurship

What we give up...

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

An example...
Very High Utility

High Utility

Low Utility

Negative Utility

___L: Come up with your own example!

(Well discuss!)

Measuring our gains and losses...

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

PPFs are used in 4 ways:

A.

analyze
opportunity costs

B. analyze efficiency

C. Measure changes in
productivity

D. changes in the
economy

Ex. wheat v. computer chips

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?

Production Possibilities Curve

___L: transition (more choices)

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?

Zoolinomics
The Economics of Zoo Keeping

Sorry, big guy! You didnt make the cut!!

Instructions
1.
2.
3.
4.
5.
6.

7.
8.

Glue Zoo handout to 82R

You and your fellow zookeepers are starting a new business...you are opening
a zoo!
Remember the Purpose is to make money and earn (and maximize) a profit.
You will have to decide which animals to include in your zoo, but space is
limited.
You have 25 acres on which to build your zoo
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.
With your fellow zookeepers, chose which animals to put in the zoo.
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. costs

No 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 op
of three cows is 1 acre. Economics decisions are
cost/benefit decisions.

Discussion Questions:
Why didnt 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 analysis
Marginal - 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 cost
Opportunity 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 benefits

Not 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.