1. Fundamental Economic
Concepts
Economic Choices and Decision Making
Academic Decathlon Lesson 3
Berryhill Economics

2. Trade-Offs
People face trade-offs, or alternative
choices, whenever they make an
economic decision.
If I have $15, I can get a CD, or I can get 8
songs on itunes
My parents have $30,000—they can send
me to small, private, prestigious school for
a year or buy me a nice new SUV

3. Opportunity Costs
An opportunity cost is the value of a
forgone opportunity—the what you have to
give up when you make a decision.
Most people hear cost and think that it can
only be dollars and cents, but costs can be
more than a price tag.
Ex: what will it cost you to study for 5
hours tonight?

4. Opportunity costs
Utility maximization comes into play here--
-you will do what costs you less
Part of economics is the idea that
people, when behaving rationally, will do
what they get the most benefit from and
that costs them the least.
Of course, utility is different for each
person, so our decisions will be different.

5. Opportunity Costs
Ex: What is your opportunity cost to go to
college next year and start your degree?
What are you giving up? What would you
gain?
What would the opportunity cost be for
Angelina Jolie (who did not attend college)
to quit her job and go back to school next
year? What would she be giving up?
What would she gain?

6. Opportunity Costs
This is why most movie and rock stars
don’t go to school once their career
begins. The costs would outweigh the
benefits.
By staying in the acting business, Angelina
is maximizing her utility—getting the most
usefulness or satisfaction from her scarce
resource (time)

7. Economic Decision Making
We all have scarce resources
This scarcity requires us to make choices
Based on our opportunity costs
We will do what gives us the most benefit
and costs us the least
This results in utility maximization