When making decisions, individuals, businesses, and governments must consider scarcity due to limited resources and unlimited wants. Rational decision-making requires weighing costs and benefits to determine the best use of resources. For individuals, this may involve career choices, education levels, and budgets that maximize benefits. For governments, rational decisions allocate scarce public funds to priorities like infrastructure, education, or defense based on anticipated economic growth and standards of living. Rational choices demonstrate an understanding of opportunity costs as the next best alternatives forgone.

1. Scarcity and
Making Rational Decisions

2. What do you
know?
Answer this question in at
least 4 sentences:
What should you consider
when making a major life
decision?
Can you define these terms?
• Scarcity
• Benefit
• Cost
• Incentives
• Rational
• Allocate

3. By the end of
this lesson you
should know….
Essential Questions
• Why do people have to make decisions?
• How do you determine the use of productive resources
you own?
• What did our school give up when it chose to _____(fill
in a local school decision students find
interesting)____________________?
• How does making a budget demonstrate the concept
of scarcity?
• Why should people weigh the advantages and
disadvantages of different alternatives when making
choices?
• What does it mean to be “rational”?
• How do we determine that decision we make is
“rational”?
• What methods can we use to help us make our choices
more rationally?
• How does self-interest influence human decision-
making?
Terms
Content Terms
• Scarcity
• Opportunity cost
• Incentives
• Durable
• Microeconomics
• Macroeconomics
• Standard of Living
• Productivity
Academic Terms
• Rational
• Allocate
• Invest

4. By the end of
this lesson you
should know….
Georgia Performance Standard
SSEF1 The student will explain why limited productive resources and unlimited wants
result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and
governments.
c. List a variety of strategies for allocating scarce resources.
d. Define opportunity cost as the next best alternative given up when individuals,
businesses, and governments confront scarcity by making choices.
SSEF2 The student will give examples of how rational decision-making entails
comparing the marginal benefits and the marginal costs of an action.
b. Explain that rational decisions occur when the marginal benefits of an action equal or
exceed the marginal costs.
SSEF6 The student will explain how productivity, economic growth, and future
standards of living are influenced by investment in factories, machinery, new
technology, and the health, education, and training of people.
b. Give illustrations of investment in equipment and technology and explain their
relationship to economic growth.
c. Give examples of how investment in education can lead to a higher standard of living.
SSEPF1 The student will apply rational decision making to personal spending and
saving choices.
a. Explain that people respond to positive and negative incentives in predictable ways.
b. Use a rational decision making model to select one option over another.
Literacy Standards
RH.11-12.3 Cite thorough textual evidence
to support analysis of what the text says
explicitly as well as inferences drawn from
the text, including determining where the
text leaves matters uncertain.
RH.11-12.7 Integrate and evaluate multiple
sources of information presented in
different media or formats as well as in
words in order to address a question or
solve a problem.
WH.11-12.1 Write arguments to support
claims in an analysis of substantive topics
or text using valid reasoning and relevant
and sufficient evidence.
WH.11-12.3 Write narratives to develop
real or imagined experiences or events
using effective technique, well-chosen
details, and well-structured event
sequences.

5. What is a Rational
Decision?
A rational decision is not just a decision made by
evaluating all choices, it is a decision that takes into
account the reason for making the decision.
Decisions should be made taking individual and national
goals into account because of scarcity.
– Scarcity is the concept that people and
countries have unlimited wants but limited
resources. This forces people to make choices
and when you make a choice, there is always a
cost.
Whether it is a country, a business or an individual, every
time a choice is made there will be an opportunity cost.
This is why making a ration decision is so important.
Rational-
consistent with
logic; sensible
Opportunity
Cost- the next
best
alternative

6. Micro Example
Kristina just won $1000 check from an essay contest. It is almost summer and
the first thing that came to her mind was to take a vacation with the money,
but she does have other options. She is going to college in the Fall and her
car needs breaks and new tires.
How should Kristina make a rational decision with her resources?
Things to consider:
• Goals
• Current situation
• Important Criteria for the results you desire
• The cost and benefit of each decision
Microeconomics- the
study of decision
making and behavior
of individuals and
firms

7. Micro Example cont..
Kristina just won $1000 check from
an essay contest. It is almost
summer and the first thing that came
to her mind was to take a vacation
with the money, but she does have
other options. She is going to college
in the fall and her car needs breaks
and new tires.
Answer the following Questions:
1. What are Kristina’s wants? What
are her limited resources?
2. If you were in Kristina situation,
what would be your top 4
options for spending the
money?
3. How would Kristina explain
choosing to go on vacation with
the money?
4. How would Kristina explain
spending the money to fix up
her car?

8. Decision Making Grid
Will help make
money
Durable
Good/Service
No additional
expense above
$1000
Multiple Uses Totals
Vacation
Car Repair
Computer
for college
Prom
One tool that can be used to evaluate decisions using important criteria is
a decision making grid.
1. List your top 4 choices
2. Determine the criteria important to your current goals and/or situation
(list criteria in order of importance)
3. Complete the chart by checking the criteria box if the answer is yes
Durable- good that will last at least 3 years

9. Decision Making Grid
Will help make
money
Durable
Good/Service
No additional
expense above
$1000
Multiple Uses Totals
Vacation 0
Car Repair X X X 3
Computer
for college
X X X 3
Prom X 1
Based on the results of using the decision making grid, what should
Kristina choose? What is her opportunity cost?
Why should she choose the car over the computer if
they scored the same?

10. Can you think of other tools or
methods you can use to make
rational decisions?

11. More Methods
Another way to make a rational decision is to do a cost benefit analysis.
Imagine in Kristina’s case that she couldn’t decided to buy the computer or
the car repair. That both of them were equally desirable. How should she
choose between the two?
If both options are equally beneficial but the car repair was $500 and the
computer was $650, then Kristina should pay for the car repairs because she
gets the maximum benefit for the lowest cost.
Assessment - Complete one of the following:
1. Write an example of when you have used cost benefit analysis.
2. Use the decision making grid to analyze a choice you will have to make
soon.

12. Macro Example
Every country faces the problem of scarcity. Countries have limited resources but their
people have unlimited wants so a choice must be made. Consider the following
example:
In the 1950’s the US government(and the UN) were asked by South Korea to send
troops to help them fight Communism. The country was in the midst of a Cold War,
and ideological battle between Democracy and Communism and our policy at the time
was to try to contain Communism as we felt it was a very dangerous threat. There
were also domestic issues the country was facing. The post war baby boom made it
necessary to provide education to an increased population of youth and since the Cold
War was fought through intelligence, there was a real constant threat of spies trying to
steal national secrets and technology.
Macroeconomics-
the study of the
economy as a whole
and decision making
by governments and
large units

13. EXPLAIN YOUR DECISION
If you were the President of the United States, what criteria and
information do you need to consider in order to make a rational
decision?
How will you justify your decision to the American people?
Write a speech:
As if you were the President of the United States.
Explain to the people how you have decided to use
the country’s resources, what it will cost them and
why it is worth it.

14. So far
can
you…
Answer these Questions?
• Why do people have to make decisions?
• How do you determine the use of productive resources you own?
• What did our school give up when it chose to _____(fill in a local school
decision students find interesting)____________________?
• How does making a budget demonstrate the concept of scarcity?
• Why should people weigh the advantages and disadvantages of
different alternatives when making choices?
• What does it mean to be “rational”?
• How do we determine that decision we make is “rational”?
• What methods can we use to help us make our choices more
rationally?
Define these
Terms?
Scarcity
Opportunity cost
Durable
Microeconomics
Macroeconomics
Can you…
• List a variety of strategies for allocating scarce resources.
• Define opportunity cost as the next best alternative given up when individuals,
businesses, and governments confront scarcity by making choices.
• Explain that rational decisions occur when the marginal benefits of an action
equal or exceed the marginal costs.
• Use a rational decision making model to select one option over another.

15. We still
need to …
SSEF6 The student will explain how productivity, economic
growth, and future standards of living are influenced by
investment in factories, machinery, new technology, and the
health, education, and training of people.
b. Give illustrations of investment in equipment and technology
and explain their relationship to economic growth.
c. Give examples of how investment in education can lead to a
higher standard of living.
SSEPF1 The student will apply rational decision making to
personal spending and saving choices.
a. Explain that people respond to positive and negative incentives
in predictable ways.
b. Use a rational decision making model to select one option over
another.
Define these Terms
• Allocate
• Incentives
• Invest
• Standard of living
• Productivity

16. Investment is Key
For both individuals and governments the key to growth is
investment. Goals should always be involved in the equation
when making decisions. Allocating resources to education,
technology and equipment can lead to increased growth in the
future.
• For the individual and the business this can mean a higher
income or more profit.
• For governments this can mean a higher standard of living
for the population.
Let’s research
Allocate-
distribute for a
specific purpose
Standard of
living- quality of
life based on the
level of wealth,
happiness,
comfort, material
goods and
necessities
available
Invest- to
devote
resources with
the expectation
of profit or
material result

17. Based on this data published in March 2014 from
the US Bureau of Labor Statistics
1. What are the benefits of investing time and money in your
own education?
2. What are the costs of investing your resources in a different
alternative?
Individual Investment

18. Making rational decisions with
money involves creating a budget.
Complete the monthly budget sheet
on the right using the data from the
previous chart for both a high school
graduate and a person with a
Master’s Degree.
$2,672 per month for HS Grad
$5,304 per month for Masters
HS Master’s
Income $2,672 $5,304
Transportation
Car/Bus
Insurance
Repairs
Gas
Food
Groceries
Eating Out
Living
Rent/Mortgage
Cable
Phone
Utilities
Clothing
Fun
Accounts
Credit Cards
Loans
Savings
Individual Investment

19. Answer the following question in
groups:
What is the difference in your
standard of living with a HS diploma
versus a Master’s Degree?
(think more than just numbers)
What incentive do you
personally have
to continue your education
after High School?
Individual Investment
Incentive- something that
incites action or effort; can
be positive-reward or
negative-punishment

20. • The most important factor in economic
growth is using resources efficiently and
increasing productivity.
• Governments invest in education,
research and development in order to
increase productivity which will lead to
efficient workers, more productive
resources, more producers, more jobs
and more money flowing through the
market.
• This increases the standard of living for
the whole country.
One example of an area of investment for
countries around the world is
renewable energy.
How can this investment increase a
countries productivity?
Government Investment
Productivity- the
amount of output
produced with a given
amount of resources
Click this link to see how
countries compare in
renewable energy
investment.
http://www.theecologist.org/News/news_analysis/829664/revealed_how
_your_country_compares_on_renewable_investment.html

21. Government Investment cont…
One example of government
investment is in renewable,
alternative and solar energy.
Assessment
On a sheet of paper create a poster that:
• Illustrates the benefit of investing in
this type of energy research
• Speaks to your audience, the
American people because it is their
tax dollars that fund the research
• Make sure it conveys that the benefit
of this investment, outweighs the cost

22. Can
you…
Answer these Questions?
• Why do people have to make decisions?
• How do you determine the use of productive resources you own?
• What did our school give up when it chose to _____(fill in a local school
decision students find interesting)____________________?
• How does making a budget demonstrate the concept of scarcity?
• Why should people weigh the advantages and disadvantages of different
alternatives when making choices?
• What does it mean to be “rational”?
• How do we determine that decision we make is “rational”?
• What methods can we use to help us make our choices more rationally?
• How does self-interest influence human decision-making?
Define These
Terms?
Content Terms
Scarcity
Opportunity cost
Incentives
Durable
Microeconomics
Macroeconomics
Standard of Living
Productivity
Academic Terms
Rational
Allocate
Invest
Complete these Standards?
• Explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and
tradeoffs for individuals, businesses, and governments.
• List a variety of strategies for allocating scarce resources.
• Define opportunity cost as the next best alternative given up when individuals, businesses, and
governments confront scarcity by making choices.
• Give examples of how rational decision-making entails comparing the marginal benefits and the marginal
costs of an action.
• Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal
costs.
• Explain how productivity, economic growth, and future standards of living are influenced by investment in
factories, machinery, new technology, and the health, education, and training of people.
• Give illustrations of investment in equipment and technology and explain their relationship to economic
growth.
• Give examples of how investment in education can lead to a higher standard of living.
• Apply rational decision making to personal spending and saving choices.
• Explain that people respond to positive and negative incentives in predictable ways.
• Use a rational decision making model to select one option over another.
Sample
Questions

23. Try These Questions from the
Released EOCT
1. What basic economic problem do both
higher-income nations and lower-income
nations have in common?
A. too many unskilled laborers
B. lack of capital goods
C. too much government
D. scarcity of resources
2. Which of the following is an example of a
microeconomic decision?
A. whether to increase or decrease the
money supply
B. whether to increase or decrease
taxes
C. how to reduce the unemployment
rate
D. how many hours an employee
should work each week
3. An individual decides to pay $8 to see a
movie instead of buying an $8 meal.
What is the opportunity cost of the
movie?
A. the satisfaction missed by not eating
the meal
B. the $8 paid to see the movie
C. the time spent watching the movie
D. the satisfaction received by going to
the movie
4. Which of the following is MOST
important for economic growth?
A. efficient use of resources
B. ample tax revenues
C. availability of resources
D. a large labor force

24. Answers
1. D
2. D
3. A
4. A

25. Resources
• “Employment Projections” US Department of Labor Bureau of Labor Statistics
http://www.bls.gov/emp/ep_chart_001.htm
• USASpending.gov
http://www.usaspending.gov/
• “2010 Global Clean Energy Snapshot” The Ecologist
http://www.theecologist.org/News/news_analysis/829664/revealed_how_your_c
ountry_compares_on_renewable_investment.html
• Georgia Department of Education’s Economics/Business/Free Enterprise EOC
Assessment Guide
– http://www.gadoe.org/Curriculum-Instruction-and-
Assessment/Assessment/Documents/Milestones/Assessment%20Guides/GM
%20Economics%20EOC%20Assessment%20Guide%20081715.pdf
• Economics GPS Frameworks: Unit 2-”The Choice is Yours”
– https://www.georgiastandards.org/Frameworks/GSO%20Frameworks/Econom
ics%20Unit%202.pdf
• Georgia Department of Education Released EOCT’s and answer keys
– http://www.doe.k12.ga.us/Curriculum-Instruction-and-
Assessment/Assessment/Pages/EOCT-Released-Tests.aspx