Extending comprehension competency focus

Answering WHY questions: Speak up your mind.

1. Why is being aware of trade-offs and opportunity costs vital in decision-

making?

2. The opportunity cost is usually defined in the terms of money or time. Why?

Reviewing: Watch video “TheProduction Possibilities Curve”. Have you learnt anything new? Be ready to answer the following questions:

1. What economic problem does the production possibilities curve illustrate?

2. How is it plotted?

3. What do points c, d, e on the curve show?

Critical thinking (Discussion competency): Discuss the following questions in groups/pairs.

(1) Write down your opinion in note form;

(2) Prepare for discussion: revise the speech formulas

1. Do wealthy people and wealthy nations have to do with scarcity and accept trade-offs?

2. Think of two non-economic factors that small businesses might consider when deciding what products to produce.

3. Why do production possibilities curves slope down from left to right?

B, C, D are efficient output combinations lying on the PP;

A is inefficient combination;

x is an output combination that is not yet attainable.

Exploring issues: Imagine that you have just received your first paycheck from a new job. Using the information from the text, complete a table like the one below by listing the trade-off and opportunity cost of each economic decision you might make.

Decision	Trade-off	Opportunity cost
Buying something you want
Saving your money

Solving problems and finding solutions: Consider the following situation about the rain-forest and speak up your mind.

The Amazon River Basin in Brazil is the world’s largest tropical rain forest and river system. But within the basin an area equal to 5,000 soccer fields is being destroyed every day. Farmers burn the forest to gain farmland for other profitable crops. Loggers cut and export the fine hardwoods for a profit. And people have penetrated the forests in search of medicinal plants.

Many scientists believe the destruction of the forest will speed up global warming. Rain-forests supply one-fifth of the world’s oxygen supply and trap carbon compounds. If the area is destroyed, its medicinal secrets will also be lost forever.

What are the rain forest trade-offs for the future in your opinion? How can these trade-offs affect our future?

Drawing conclusions: When you choose to buy something, is the value of the item you buy greater or smaller than the opportunity cost?

Applying information:

Assume that you are an entrepreneur who owns a factory that makes cell phones. You would like to expand your business and need a loan of $200,000 from the bank to do so. After waiting many months you learn that your loan has been approved. Your problem is where to spend the money. Five options appear below—each costs $200,000. To help determine where the money will be spent complete the form below.

Ex. 1. Make up a decision. Place a check mark next to the one area where you would spend the money. You may mark only one area and cannot choose to spend less than the full amount.

	Pay raises for existing employees. Some of your key employees are threatening to leave unless they receive significant increases in their compensation.
	Purchasing new machinery to increase production. The existing machinery has been fixed many times and is currently being repaired for the third time this year.
	Hiring new employees. Most of your managers complain that because they are severely understaffed, they cannot meet production quotas.
	Increased advertising in trade magazines. Last year a consultant advised that the key to the future growth of your business is substantially increasing your advertising budget.
	Buying land on which to build a new factory. You have found a place to build a new factory in another part of the country where the costs are much lower.