Opportunity Cost Economics 11 Stewart

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 Example: The benefit lost of choosing

Example You have two $1500 burning a hole in your pocket. There are three things you would like to do with it on your March Break, all costing $1500: 1) Take an all inclusive vacation to the beautiful island of Jamaica. 2) Buy a new 3D TV to watch on your week break 3) Go on the school sponsored trip to Costa Rica and volunteer to help a community in need Whatever you choose, you will have to do without the other two (and what goes along with it) = Opportunity Cost

What are your opportunity costs? Create the chart below in your notes: ActivityOpportunity Cost Monetary Cost Benefit Gained Vacation to Jamaica 3D TV Volunteer in Costa Rica Answer the following: 1)How does the monetary cost of the activity you choose compare to the activity/opportunity not chosen? 2)Is money the only concern when considering choices? 3)What other concerns must be taken into account when weighing opportunity costs?

Ms. Stewart’s Opportunity Costs ActivityOpportunity CostMonetary CostBenefit Gained Take a Masters degree - Loose free time (5 hour class a week) - Miss all the great TV shows on the night of my class - Can not make plans to do something else on the evening of my class - Read the course text book instead of a different book I might enjoy more $5000+ (Tuition, books, travel to classes) - Learn something new - More job opportunities - Higher pay Buy a house - Less spending money for extras (wants) - Yearly vacation -$$$$$$$- No more noisy neighbours -Own my own place, I can do whatever I want (Adopt a DOG!) - Building equity - Sell it, make a profit