Opportunity Cost

Decision Making The act of dealing with the problem of scarcity Choosing the best way to satisfy the most wants with our limited resources

“Opportunity Cost” The opportunity cost of an activity is the value of all that is lost from taking one course of action over another. Ie. the benefit lost of choosing

Example You have $2000 burning a hole in your pocket. There are three things you would like to do, all costing $2000. 1. Take a two week winter vacation to the beautiful island of Jamaica. 2. Buy a new 3D TV system. 3. Finance yourself to spend a summer working in Africa for a volunteer organization affiliated with the Canadian International Development Agency (CIDA). Whatever you choose, you will have to do without the other two (and what goes along with) = Opportunity Cost

What are your Opportunity Costs? Create a chart on a sheet of looseleaf in your binder. Answer the following: How does the monetary cost of activity chosen compare to that of the opportunity not chosen? Are monetary issues the only concerns when considering choices? What other concerns must be taken into account when weighing opportunity costs?

Opportunity Cost Economic decisions must be both effective and efficient. If we consume resources and in the end we are satisfied then this is effective. If we consume the bare minimum amount of resources to achieve an outcome we are satisfied with we are both effective and efficient. Efficiency allows us to save resources to use later.

Opportunity Cost At any time when we use resources to achieve something we have to do without something else. This is the opportunity cost of our actions. Opportunity cost is what is lost from taking one course of action over another. In economics we will consider not only what we are gaining but what we are missing out on as well (what we stand to lose).

Simulation School building simulation (8 groups)

Activity Read article ‘Why Didn’t Chris Rock Go to College” Complete questions

Hand In On a piece of paper explain what opportunity cost means using an example of a time in the past year where you had to make a decision. Include: The definition of opportunity cost The choices you were faced with and your decision What the opportunity cost of your decision was Why you choose the option you did

Activity Go over together the “Think Like an Economist” on page 11 and have them graph the data about temp and cones sold on page 12 and answer the Q’s.