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Basic Economics

The Decision Making Process

Opportunity Cost

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What do you choose?

If you had to choose between the following things on a Saturday night, which would you choose?

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  1. Go out to dinner on a date
  2. Go with friends to a movie
  3. Work an extra shift at work
  4. Stay home with family and watch a movie

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Making Choices

Opportunity Cost

  • We often make decisions about what to do based on opportunity cost
    • The value of the next best alternative situation (i.e. what you are giving up by making your choice)

Economic Voting

  • When we choose to spend our money on a product or service, we are essentially “voting” for that product/service

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Business and Profit

Business: any activity that seeks to profit by providing goods or services to others

  • Fulfill wants and needs
  • Profit Motive
    • Increase profits through: reducing costs, changing prices, increasing quantity of products sold

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Supply and Demand

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What happened here?

  • When no one wanted the hula hoops, what happened to the price?
  • When the hula hoops became popular, what happened to the price?
  • Why might this be the case?
  • Can you think of any real-life examples when this happens?�

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Price of Apple Products

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Rational Buying Decision

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  • Does this item satisfy my wants and needs?
  • Does this item satisfy a goal of mine?
  • Is this item reasonably priced?
  • Is this a good quality item?
  • Have I considered my other options?
  • What is my OPPORTUNITY COST?

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Impulse Purchase

An impulse purchase is an unplanned decision to buy a product or service

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Decision Making Process

  1. Identify the problem
    • Specify the decision that needs to be made
  2. List the alternatives
    • Search out your options
  3. Determine the pros and cons
    • Sift through and narrow down to 2-3 options
  4. Make the best decision
    • Select your choice
  5. Evaluate your decision
    • Study and reflect upon your choice