OPPORTUNITY COST

YOU ARE GOING RAFTING! This weekend, you and some friends are going on a rafting trip. Make a list of everything you need to pack and take with you. If there was a problem and the raft was going to flip, what 8 items would you save? Now, from that list of 8, you must shorten the list to 3. What would you save? If you could have saved 4 instead of 3, what extra item would you have saved?

OPPORTUNITY COST IS THE BEST CHOICE NOT TAKEN.  Of all the items you didn’t save, which would have been the best choice to save?  When you choose one thing over the other, it costs you the loss of that thing not chosen.

NEEDS VS. WANTS Needs These are things that are necessary to have in order to live. Example: Food, Water, Shelter Wants These are things that are not necessary to have in order to live. Example: iPhone, Name Brand Clothing, etc.

USING THE ITEMS YOU KEPT, CLASSIFY THEM INTO NEEDS AND WANTS Needs Wants

CHOICES Identical twins Amal and Juan graduate with Bachelors degrees and receive the same job offer. Amal passes up the job offer to pursue a Masters degree while Juan takes the job offer and begins working. Two years pass and Amal graduates and begins working. By this time Juan has been promoted to a position that is comparable to Amal’s starting position, and Juan’s salary has increased to an amount that is comparable to Amal’s starting salary. So who made the better decision, Amal or Juan?

EXAMPLES OF OPPORTUNITY COST Should I go to school today? Should I go to college after high school?

WHAT IS THE OPPORTUNITY COST IF… If you have a job, what is the opportunity cost of going to work? 1.Sleeping in 2.Doing something you enjoy 3.Looking for a job you like better

WHAT IS THE OPPORTUNITY COST IF… If you choose to go to college after high school. 1.Tuition money could have been spent on something else. 2.Time in class could have been spent doing something else. 3.Could have been working at a job and making money 4.Had more free time.

WHAT IS THE OPPORTUNITY COST IF… If we spend $150.7 million for a ballistic missile defense system (Center on Arms Control and Nuclear Proliferation) in Colorado. This represents real choices that the government must make with our tax dollars. The opportunity cost in this situation depends on what you value more: military spending, health care, or education.  27,547 people could get health care  37,384 scholarships for university students

MORE EXAMPLES… You are a personal trainer who makes $50 an hour training. Tonight you have the option of staying home and resting or working. What is your choice? What is the opportunity cost? Opportunity Cost involves more than just money. Example: Soccer practice vs. Favorite TV show. What is the opportunity cost? Your mom and dad want you to become a lawyer but you would rather be something else. If you give in to their wishes what is your opportunity cost?

REAL LIFE…YOUR LIFE! What are examples of opportunity cost in your life. Take 3 minutes and make a list of examples of opportunity cost in your life. Remember, Opportunity Cost is the most desirable alternative we give up to get what we want.

PRACTICE 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: 1. What would you spend your five dollars on? 2. What would you be willing to give up?

1. How many sodas can you buy instead of one movie ticket? 2. How many pieces of gum can you buy instead of one soda? 3. If you buy four pieces of gum, how many sodas could you have bought? Remember: Opportunity Cost is not everything you gave up, but the highest valued (to you) alternative you gave up. PRACTICE

1. In the first panel, what does Calvin want to do with the ball? 2. Using the idea of 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.

CLOSING A headline in the New York Times read “Study Finds Enrollment Is Up At Colleges Despite Recession.” How would you rewrite this headline now that you understand the idea of opportunity cost?

SUPPLY AND DEMAND REVIEW  Explain the concept of supply and demand.  Explain what creates a shortage and a surplus.  Explain how supply and demand affects the price of a product?

GET OUT A PIECE OF PAPER Supply and Demand Learning Check

SUPPLY AND DEMAND How does the Willy Wonka Chocolate Contest affect the demand for Wonka Bars?

WONKAHISTERIA! The demand for Wonka candy bars increased dramatically, didn’t it? People all around the world were trying to get their hands on as many bars as possible. Explain how this huge demand for Wonka candy bars affect the supply of Wonka candy bars? What else might happen to the Wonka bars? Why?

ONCE 2 OUT OF 5 GOLDEN TICKETS HAVE BEEN FOUND… What do you think will happen to the supply of Wonka chocolate bars as the hunt continues? Will there be a surplus or a shortage, also called scarcity, of the bars? Explain.

PREDICTING…  When all of the golden tickets have been found, what do you think will happen to the demand for Wonka candy bars? Explain your answer in your notebook.  What in today’s society could be compared to the hysteria of looking for the golden ticket?  If there are no more golden tickets, Wonka bars aren’t so special anymore. What if the Wonka company didn’t plan for this and continued to make lots and lots of Wonka bars? Explain what all is likely to happen to Wonka Bars. Why?