Opportunity Cost
Opportunity cost Unlimited Wants Choice Scarcity Limited Resources Choose to satisfy some wants = Give up some wants
Opportunity cost is… The value of the highest valued options forgone
Let me choose a girl friend! Mary Sally Betty Let me choose a girl friend!
Very Pretty!
My O.C. of choosing Mary is… Sally Betty My O.C. of choosing Mary is… The value of Sally
If I can only choose Mary, my O.C. of choosing Mary is… Sally Betty If I can only choose Mary, my O.C. of choosing Mary is… None, because no choice, no O.C.
Exercise 1st Choice: Revision 2nd Choice: Sleeping 3rd Choice: Doing Sport
Q.1 The highest valued option is… 1st Choice: Revision 2nd Choice: Sleeping 3rd Choice: Doing Sport
Q.2 What options are forgone… 1st Choice: Revision 2nd Choice: Sleeping 3rd Choice: Doing Sport
Q.3 Which is the highest valued option forgone? 1st Choice: Revision 2nd Choice: Sleeping 3rd Choice: Doing Sport
Q.4 The opportunity cost of revision is… 1st Choice: Revision 2nd Choice: Sleeping 3rd Choice: Doing Sport
Q.5 The O.C. of Sleeping is… 1st Choice: Revision 2nd Choice: Sleeping 3rd Choice: Doing Sport
Q.6 The O.C. of doing sport is… 1st Choice: Revision 2nd Choice: Sleeping 3rd Choice: Doing Sport
Q.7 If mum order Mary to sleep, what is the O.C. of sleeping? 1st Choice: Revision 2nd Choice: Sleeping 3rd Choice: Doing Sport None, because Mary has no choice, so she has no O.C.
The O.C. of watching Harry Porter is… The value of Cars 2
The O.C. of watching Cars 2 is… The value of Harry Porter
The O.C. of watching Kung Fu Panda is… The value of Harry Porter
In what situation, there is no O.C. of watching Harry Porter? When the other movies cannot be watched
Will O.C. change? When the value of the highest valued option forgone changes, the O.C. changes. O.C. = the value of highest value option forgone (2nd option’s value)
My O.C. of choosing Mary is… Sally Betty My O.C. of choosing Mary is… The value of Sally
Situation 1: the value of highest valued option (1st choice) changes
My O.C. of choosing Mary change or not?? Sally Betty My O.C. of choosing Mary change or not??
Situation 2: the value of other forgone option (3rd choice) changes
My O.C. of choosing Mary change or not?? Sally Betty My O.C. of choosing Mary change or not??
Situation 3: the value of the highest valued option forgone (2nd choice) changes
My O.C. of choosing Mary change or not?? Sally Betty My O.C. of choosing Mary change or not??
My O.C. of surfing the net is… Exercise My O.C. of surfing the net is… The value of playing basketball.
Exercise Event Change of O.C. 1. Sally’s best friend will play basketball with her 2. There are some problems in the Network 3. There is good desert when Singing Karaoke