Module 2: Choice in a World of Scarcity
Section outline
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You will learn quickly when you examine the relationship between economics and scarcity that choices involve tradeoffs. Every choice has a cost.
Because people live in a world of scarcity, they cannot have all the time, money, possessions, and experiences they wish. Neither can society.
This chapter will continue our discussion of scarcity and the economic way of thinking by first introducing three critical concepts: opportunity cost, marginal decision making, and diminishing returns. Later, it will consider whether the economic way of thinking accurately describes either how we make choices and how we should make them.
Upon completion of this module, you will be able to:- Calculate and graph budget constraints
- Explain opportunity sets and opportunity costs
- Evaluate the law of diminishing marginal utility
- Explain how marginal analysis and utility influence choices
- Interpret production possibilities frontier graphs
- Contrast a budget constraint and a production possibilities frontier
- Explain the relationship between a production possibilities frontier and the law of diminishing returns
- Contrast productive efficiency and allocative efficiency
- Define comparative advantage
- Analyze arguments against economic approaches to decision-making
- Interpret a tradeoff diagram
- Contrast normative statements and positive statements
To achieve these objectives: [Edit these items to match your resources and activities.]
- Read the Module 2 Introduction
- Read Chapter 2 in the course textbook, Microeconomics.
- Complete Module 2 Discussion.
- Complete Module 2 Quiz.
- Complete the Module 2 Assignment.
- For course instructors, list any other reading assignments here. [Include all reading assignments here that are outside of Moodle. Be as
concise as possible. More information can be included in the
third-party section below, if necessary.]
- Complete the [specific activities in the module. Include all in the order you want them completed.]
Module Pressbooks Resources and Activities
You will find the following resources and activities in this module at the Pressbooks website. Click on the links below to access or complete each item.
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Students mustMark as done
Chapter 2 of Microeconomics
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Students mustMark as done
In Class Activity (hide from students)
Course SLO 1: Identify the basic economic principles that serve as the foundation of economic analysis
Course SLO 2: Understand the interaction of supply and demand in determining prices and the role of prices in coordinating economic activity
Module SLO: 2.1.2 Explain Opportunity sets and opportunity costs
When we think about taking an action or participating in an activity, we often only think about the monetary cost of this action and do not consider anything else when deciding whether to act. As we consider opportunity cost, we think about more than just the monetary cost of an action by thinking about everything we must give up to take that action. In this activity, your task is to:- Identify and describe the opportunity cost of an activity that you enjoy. Remember to consider everything you must give up to take part in this activity.
- Using opportunity cost and benefits, demonstrate how someone might decide whether to participate in your activity or not.
Instructor Notes with Hockey and Uber Example:
One activity that I enjoy doing with my family is attending hockey games on Saturday nights. An alternative to attending hockey games for me would be driving for and making money with Uber around our nearby city. In this example, the opportunity cost of attending a hockey game, in addition to the cost of our tickets, is the wages I could have earned by driving for Uber. In deciding whether to attend a hockey game or driving for Uber, I must consider whether the hockey game is worth the price of admission plus wages I could have earned by driving for Uber. If I value the hockey game more than the price of tickets PLUS the lost wages, I should attend the hockey game; however, if I value the money, I forego more than the hockey game, I should drive for Uber on this given Saturday night.
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