"Trade-Off _ Opportunity Cost - casimirbundrick"
Trade-Off & Opportunity Cost Trade Off • Definition: a giving up of one thing in return for another • All of the alternatives that we give up when we choose one course of action over another. • Example: Buying a car Trade Off - Money cannot be saved or used to buy other things. Individual Trade Offs • Example: Spending more time on homework studying… • Trade Off – Not watching T.V., Talking to friends, playing sports etc. Business Trade Off A CEO decides to lay off workers to save money. The desire to make more money is driving the decision…What is the trade off? Society Trade Offs • “Guns or Butter” • If a society decides to produce more military goods (guns), it will have fewer resources to produce consumer goods (butter). Opportunity Cost • Definition: The most desirable alternative given up as the result of a decision. Example: For a consumer with a fixed income, the opportunity cost of buying a new dishwasher might be the value of a vacation trip never taken or several suits of clothes that could not be bought. Thinking at the Margin • Definition: Deciding whether to do or use one additional unit of some resource. Example: Wake up 1 hour early, get a C; wake up 2 hours early and get a B; 3 hours early and get an A. Define and give an example of each…Page 153-154 • Variable cost • Fixed cost • Total cost • Marginal cost • Incentive • Wage • Salary