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Sample General Lesson

A Lesson on Opportunity Cost

Introduction
Opportunity cost is a fundamental concept in economics, which states that every economic choice has a cost. It further states that every choice has a cost because every choice involves a trade-off: you give up something in favor of your first choice. The very fact that you are able to choose means that there were alternatives to consider. When you choose to use your limited income for one thing, you give up other goods. When you choose to use your limited time one way, for example, seeing a movie, you give up other uses of that time, say, studying. The opportunity cost is defined and measured as the "best alternative foregone" when a choice is made. In other words, the opportunity cost is the next best thing, in your own view, that you could have done with your limited resources, your income or time, for example. This notion that resources are limited is an important aspect of the opportunity cost concept since, if resources were unlimited, you would not have to choose at all. The opportunity cost of a choice reflects the real consequences you expect will follow from making a particular decision. This cost is usually the difference between your first and second choices. Thus, evaluating the opportunity cost creates a recognition of the consequences - both benefits and costs - of a choice and helps you make an informed and rational decision. Some of these consequences may not be apparent for quite a while. Business and government decisions have opportunity costs as well, as their limited resources are needed to accomplish many tasks.

Previous Knowledge Expected

Economic wants: desires that can be satisfied by consuming a good, service, or leisure activity.

Limited resources: resources, which include labor (human resources), land, and capital goods, are limited in quantity.

Scarcity: Economic wants exceed limited resources. (See Content Standard 1 in National Content Standards in Economics from EconomicsAmerica for additional descriptions and information about materials to teach this background material.)

Concepts

Opportunity cost: what you give up when you decide to do something.

Benefit: something that satisfies your wants.

Content Standards From National Content Standards In Economics

• From Content Standard 1:
  People cannot have all the goods and services they want;
  as a result, they must choose some things and give up others.
  
  
• From Content Standard 2:
  Effective decision making requires comparing the additional costs
  of alternatives with the additional benefits.

More About Opportunity Costs

E.C. Coulson and S. McCorkle, Economics for the Elementary Classroom, SPEC
Publishers, Inc. Ballwin, Missouri, Chapter 1

D. R. Leet, R.J. Charkins, N.A. Lang, J.S. Lopus, and G. Tamaribuchi,
Personal Decision Making: FOCUS on Economics, EconomicsAmerica, Lesson 1

Objectives

• Content Standard 1:
  Students will be able to use this knowledge to identify what
  they gain and what they give up when they make choices.
  
  
• Content Standard 2:
  Students will be able to use this knowledge to make
  effective decisions as consumers.

Lesson Description
In this lesson, students will collect and use information from the web to evaluate the opportunity cost of purchasing a good. Students should use a decision process of:

1. listing the criteria for making a choice.
   
   
2. listing the possible alternative choices.
   
   
3. evaluating each possible choice against the criteria, i.e., listing the advantages and disadvantages of each choice.
   
   
4. choosing the best alternative, saying why it is the best, and stating the opportunity cost of their choice.

Students will share their decisions with others. The first exercise is a very simple application of opportunity cost and the second is more complex.

Time Required
One or two class periods.

Materials
Student access to a computer connected to the World Wide Web.

Elementary:

Exercise 1:
This one is very fishy! Your family might be getting an aquarium with tropical (saltwater) fish and each member of the family gets to choose ONE fish! There are many beautiful tropical fish! Your teacher has agreed to help you go to the web and pick out THREE kinds of tropical fish you would like to have. There are several tropical fish websites, like this one, for example. Click on each of the pictorial guides to see the beautiful colors of angelfish, butterfly fish, clownfish, and tangs (surgeonfish). You can also find pictures of other kinds of fish at this website. Now, choose which kind of fish is your favorite, which is next, and which one is last. What is the opportunity cost of getting your first choice?

Exercise 2:
A kitten or tropical fish? Your family decided to let you choose to get either a kitten or an aquarium with tropical fish for your birthday, but not both. They also told you that you have to feed and take care of your pet. Remember that getting a pet is for life and not just for birthday! Your teacher will help you use the web to make your choices. Go to visit the Kitten or Pet Club Cat Links sites for good information and help with getting a new cat or kitten. A kitten from the Humane Society is very nice, but if you are interested in learning about cat breeds, look at the summaries of breed information from the Cat Fanciers Association. There are also pictures of cat breeds.

Now, about that aquarium! This website at Beginner Saltwater Fish discusses which fish are good for beginners and gives some tips on taking care of your aquarium. Pictures of various species of fish are found here, so you can pick the kind of fish you'd like.

What are the benefits and costs of getting the kitten? Be sure to include the future costs of taking care of your pets. Remember that you have to care for your new pet every day, and using your time is a cost because you could be doing other fun things! What are the benefits and costs of getting the aquarium? Which do you choose, the kitten or fish? Why?

Secondary:

Exercise 1:
The members of your Spanish language class have each won a one-week trip to a South American country where Spanish is the most common language. You get to travel for 4 days and then live 3 days with a family in that country to learn more Spanish. You get to choose one South American country for your Spanish language trip. What are the criteria you will use for making this choice? Check on the countries on the web. One place to find out about a country (and also to be sure the language is Spanish) is to go to the CIA Fact Book home page and click on the latest CIA Fact Book. Find out about the resources of the countries. You can also search the web by clicking on "search" in your browser software and using keywords of "travel" and the country name to find more travel information for the country. After looking over the information, choose four countries that sound interesting and then use a decision grid to list advantages and disadvantages for each country. Which country will you visit? What is the opportunity cost of this choice?