Opportunity Costs & Decision Making Ross
Objectives The student will: Learn about a making choices and using a decision making model. Think about the benefits and costs to making particular decisions. Practice making decisions both individually and in a group.
Discussion Launcher Decision about money use You have $300. What should you do with it? Options: A. Put it in a savings account for college. B. Spend it on a new television set. C. Spend it on a class to learn computer repair. D. Buy materials for your cookie business. E. Throw a party for all of your friends. Think about why you chose that option and write it down.
Think About This…. Your Aunt sent you $20 for your birthday. Answer the following questions: What did you choose to do with it? After you made your decision, did you get the most from that choice, Why or why not? Why do you think decisions and choices are sometimes hard to make?
Concepts Scarcity Unlimited Wants Limited Resources Opportunity Costs
Scarcity We make personal decisions and we make decisions as groups. Decisions are hard to make because we can’t have everything we want. This is called scarcity. Because of scarcity, we must make choices. Whenever a choice is made, something is given up.
Unlimited Wants Name something you wanted last year? Do you still want that item? Why do "wants" change? Do you ever seem to run out of "wants?"
Limited Resources If we had unlimited dollars, could all of us purchase everything we wanted? What are resources? There is a limit to the amount of resources we have available to produce goods and services we all desire. Scarcity = the result of unlimited wants and limited resources colliding.
Opportunity Cost Every resource has an alternative use. An opportunity cost is given up when a choice is made. For example: If you have an hour after school, you might be able to a)homework play a game, b) play with friends, c) do homework d) read a book. Suppose you rank your choices from highest use to lowest.
- cont. Opportunity Cost - Your first decision is your choice. Your opportunity cost is not all the choices given up, but the next best alternative. (Your second choice) EXAMPLES: Giving up time to watch your favorite movie to study Attending basketball practice instead of going to you favorite musician concert Can you think of another opportunity cost?
Decision Making Model 1. Identify the problem. 2. Brainstorm as many ideas as possible for solutions. 3. Evaluate the solutions. 4. Select the best solution and develop a plan to carry it out. 5. Carry out the solution, but be ready to make changes to the plan. 6. Evaluate the results of your decision honestly. If the solution is not working, develop a new plan.
Group Activity Read the Group Activity Answer the following questions: Did everyone make the same choices? How may of each item were chosen? Explain your choices to the group.
Individual Activity Complete the choice activity individually. Complete the model on your own. Make a decision about a “gift certification.”
Conclusion Most students have practiced thinking of "alternatives" to the choices they are making, but the decision making is generally based on their limited experience or impulse. The addition of criteria will help you think through the important limitations as well as what really is important. Y Of course, the first time or two will take the most time, but soon it will become a familiar tool. Be sure and emphasize that you may differ from one another in criteria that you will use. Remember that the criteria may not be the same even when working through the same problem.
Ticket Out the Door Step 1: _________ Step 2: _________ Step 3: _________ Step 4: _________ Step 5: _________ Step 6: _________ A. Select the best solution and develop a plan to carry it out. B. Identify the problem. C. Carry out the solution, but be ready to make changes to the plan. D. Brainstorm as many ideas as possible for solutions. E. Evaluate the results of your decision honestly. If the solution is not working, develop a new plan. F. Evaluate the solutions.