3. What you will learn... Opportunity cost Take this challenge In economics, opportunity cost is the cost in terms of the ___________________ forgone. highest valued option

4. 1. Eason Mary likes pop music. The order of her preference for pop singers is as follows: 2. Kelly3. Nicholas xample:

5. Suppose her mother gives her $300. She wants to spend it on a ticket to one of the singers concerts. Each concert ticket costs $300. 1. Eason Mary likes pop music. The order of her preference for pop singers is as follows: 2. Kelly3. Nicholas xample:

6. If your answer is giving up both Kellys and Nicholass concert tickets… If she chooses to buy a ticket to Easons concert, what does she give up? Incorrect! Think again !Can she buy tickets to the two singers concerts if she does not buy a ticket to Easons concert? +

7. If your answer is giving up a ticket to either Kellys or Nicholass concert... Incorrect! Think again ! Which concert ticket will she buy if she is allowed to choose between them? If she chooses to buy a ticket to Easons concert, what does she give up?

8. You should now realise that... Mary only gives up Kellys concert ticket when she chooses to buy a ticket to Easons concert. ChosenGiven up

9. You should now realise that... Mary only gives up Kellys concert ticket when she chooses to buy a ticket to Easons concert. Think zone Q What is Marys opportunity cost of buying a ticket to Easons concert? Answer Q Is the opportunity cost of an action measured in terms of money? Answer

10. Think zone Q What is Marys opportunity cost of buying a ticket to Easons concert? A ticket to Kellys concert ticket is the _______ valued option among Marys forgone options. highest Since a ticket to _______ concert ticket is the highest valued option among Marys forgone options, it is her opportunity cost of buying a ticket to Easons concert. Kellys

11. Think zone Q Is the opportunity cost of an action measured in terms of money? In the example, all options involve the same expenditure of $300. Therefore, opportunity cost refers to the highest valued option forgone, NOT the expenditure incurred in the choice. If opportunity cost is measured in money terms, all three options will bear the same cost.

12. Take this challenge 1 Q Mary is considering which of three streams she should enrol in at high school. Since there is no information on Marys preference, we do not know the answer. Science stream? Arts stream? Business stream? What is her cost of enrolling in the arts stream?

13. Take this challenge 1 Q Science stream. Because it is the highest valued option forgone. What is her cost of enrolling in the arts stream? If Marys order of preference is as follows: 1. Arts stream 2. Science stream 3. Business stream Mary is considering which of three streams she should enrol in at high school.

14. Take this challenge 2 Mary chooses between two options for her lunch:

15. Take this challenge 2 Mary chooses between two options for her lunch: Q How will the cost of buying the sandwiches change if a fly is found in the bowl of noodles?

16. Take this challenge 2 If your answer is: Incorrect! Think again ! Has the value of the highest valued option forgone changed? Unchanged because the highest valued option forgone is still the bowl of Japanese noodles...

17. Take this challenge 2 If your answer is: Unchanged because the highest valued option forgone is still the bowl of Japanese noodles... Although the highest valued option foregone is still the bowl of Japanese noodles, the value of that bowl of noodles has decreased. You should recall that when the value of the highest valued option forgone changes, the cost will change too. Hence, the cost of buying the sandwiches will be ____. lower

18. Take this challenge 3 Q How will the cost of buying the sandwiches change if they do not taste the way she expected?

19. Take this challenge 3 If your answer is: Incorrect! Think again !Has the value of the highest valued option forgone changed? Lower because the value of the sandwiches becomes lower...

20. Take this challenge 3 You should recall that when the value of the highest valued option forgone remains unchanged, the cost will change / will not change. If your answer is: Lower because the value of the sandwiches becomes lower...

21. Take this challenge 3 If your answer is: Lower because the value of the sandwiches becomes lower... Although the value of the sandwiches is lower, the value of the bowl of Japanese noodles _______________. remains unchanged

22. Take this challenge 4 Back to the concert ticket example. If Mary can buy a ticket to Kellys concert at a 50% discount, will her cost of buying a ticket to Easons concert change? 50% off Q

23. Take this challenge 4 If your answer is: Incorrect! Think again! Has the value of the highest valued option forgone changed? How many tickets to Kellys concert does she have to give up? No, because the price of a ticket to Easons concert remains unchanged...

24. Take this challenge 4 If your answer is: No, because the price of a ticket to Easons concert remains unchanged... Mary has to give up ___ tickets to Kellys concert now. two X 2

25. Take this challenge 4 If your answer is: No, because the price of a ticket to Easons concert remains unchanged... The cost of buying a ticket to Easons concert _______ although the price of it remains unchanged. increases