Return

All economic questions and problems arise from scarcity. Economics assumes people do not have the resources do satisfy all of their wants. Therefore, we must make choices about how to allocate those resources. We make decisions about how to spend our money and use our time. This EconomicsMinute will focus on the central idea of economics- every choice involves a cost.

KEY CONCEPTS

Choice, Costs, Decision Making, Opportunity Cost, Trade-off

STUDENTS WILL

  • Define opportunity cost.
  • Determine the opportunity cost and trade-offs for certain decisions.
  • Select criteria important for decision making.

INTRODUCTION

1. How many sodas can you buy instead of one movie ticket?
[You can buy five sodas instead of one movie ticket. Students should divide the price of a movie ticket by the price of a soda]

2. How many pieces of gum can you buy instead of one soda?
[You can buy two pieces of gum instead of one soda. Students should divide the price of gum by the price of a soda.]

3. If you buy four pieces of gum, how many sodas could you have bought?
[If you buy four pieces of gum, you could have bought two sodas.  Students should multiply the price of gum by four which equals two, then divide two by the price of a soda which equals two.]
 

In order to buy a movie, you need to give up a certain amount of gum and soda. If you buy ten pieces of gum, you give up going to the movie or buying soda. Decisions involve trade offs. When you make a choice, you give up an opportunity to do something else. The highest-valued alternative you give up is the opportunity cost of your decision. Opportunity cost is the highest-valued forgone activity. It is not all the possible things you have given up.

For example, if you go to the movies you have to give up a certain amount of gum and soda. If you are a sodaholic, you have to give up five sodas. If you are gum fanatic, you surrender ten packs of gum. But, the opportunity cost of a movie is not five sodas and ten packs of gum. It is five sodas or ten packs of gum.

RESOURCES

PROCESS

Go to the Pokemon Guide and answer the following questions.

1. What is the opportunity cost of an unlimited edition Mewtwo in terms of other Pokemon cards? [The answers will vary. Any combination of Pokemon cards that equals the price of the unlimited edition Mewtwo works as an answer.]

2. Go back to the gum, soda, movie ticket example. What is the opportunity cost of an unlimited edition Mewtwo in terms of movie tickets? [You would have to give up two movie tickets for one unlimited edition Mewtwo.]


All kinds of decisions involve opportunity costs, not just ones about how to spend your money. For example, if you have soccer practice when your favorite television show is on, part of the opportunity cost of soccer practice is missing that television show. When you made the choice to join a soccer team, you had to tradeoff missing that television show for becoming a better player

Go to this Calvin and Hobbes website .

1. In the first panel, what does Calvin want to do with the ball? [Calvin wants to play football with the ball.]

2. Using the ideas of trade-offs and opportunity cost, explain why Calvin gives Hobbes the ball. [Calvin sees a trade-off between losing the game and having an ambulatory adulthood. The opportunity cost of not being able to walk is greater than losing the game. Calvin surrenders the ball to Hobbes.]

ASSESSMENT ACTIVITY

All economic questions and problems arise from scarcity. Economics assumes people do not have the resources do satisfy all of their wants. Therefore, we must make choices about how to allocate those resources. We make decisions about how to spend our money and use our time. This <> EconomicsMinute will focus on the central idea of economics- every choice involves a cost.

Let's say you have five dollars. What would you like to spend it on? There are a million things you would love to spend five bucks on, but let's imagine there are only three things out there you really want to buy: gum, soda, and movie tickets. Look at the price chart below and answer the questions.

  • What would you spend your five dollars on?
  • What would you be willing to give up?

Good

Price

Gum

$ .50

Soda

$1.00

Movie Ticket

$5.00

 

EXTENSION ACTIVITY

You won a radio station contest and you are now $300 dollars richer. You can finally start looking for a new stereo. Determine what criteria you think are important for choosing a stereo and identify the trade-offs made when selecting one stereo over another.

EDUCATOR REVIEWS

  • “I thought the game was fun and interesting.”

    Tim Rademeyer   POSTED ON January 25, 2005

  • “This is a terrific lesson to use for trade-offs.”

    Daniel Strickand   POSTED ON August 24, 2005

  • “Thank you for your help. This site is great.”

    Ruth Hayes   POSTED ON October 28, 2005

  • “I appreciate you giving such great examples and explanations on how to start teaching young kids economics. It's great.”

    Lisa   POSTED ON October 1, 2006

  • “I am taking a college course and your explanations really helped me grasp the concept!”

    Kelly S.   POSTED ON May 4, 2007

  • “Thank you. I am trying to teach the concept of opportunity cost to government officials in Indiana particularly with regard to the value of time for a poor person carrying water. It is a very difficult concept to introduce and I believe that ideas from your lesson plans will be helpful.”

    David Foster   POSTED ON July 26, 2007

  • “What a nice page! Opportunity cost helped me to deal in my economics subject!”

    Mary Joy D., Los Angeles, NY   POSTED ON November 25, 2008

  • “I reviewed this lesson for possible use and thought it was great.”

    Linda H., Anchorage, AK   POSTED ON December 11, 2008

  • “I like this site. I'm a 5th grader doing this for school.”

    Emily T., Copley, OH   POSTED ON January 8, 2009

  • “It's my first year doing economics and your explanations are really opening my eyes. Now I can understand economics better!”

    Lipton, RI   POSTED ON February 18, 2009

  • “I love this page, I am home schooled and in 5th Grade.”

    Hannah .C, Bellvue, TN   POSTED ON October 16, 2009

  • “This lesson is just what I was looking for! Yesterday, I covered Wants v. Needs and had my students make collages of them. Today, I covered Scarcity and, again, used the students collages. Since many of my students put autos in their collages, I can use this lesson and expand it to include the autos in the collages, once again for my Opportunity Cost lesson tomorrow! THANK YOU!”

    Robert R., Frankfort, IL   POSTED ON November 3, 2009

  • “I always have a tough time trying to relate economics to my students. This lesson was perfect to explain opportunity cost and trade off. Using the cartoon really helped my students think outside the box!”

    Michelle, Ontario, NY   POSTED ON February 8, 2010

  • Review from EconEdReviews.org

    Quick Lesson - needs link updated.

    “This lesson really needs to be aged at grades 3-5. The concepts and presentation of the lesson were very easy for my middle school students. The lesson itself took very little time and the pokeman link has been blocked by my school district. I like the extension activity though because it fit their interests better and you could use it on the computer using the internet or without the computer using Sunday ads. ”

    Amy B   POSTED ON August 26, 2008

Add a Review