OPENING ACTIVITY
1.
2.
3.
4.
Make a list of all the things you could purchase
with $20.
From your list, choose your top 2.
Make a list of the pros and cons of your top 2.
Now choose one. How did you decide that was
your top choice?
OPPORTUNITY COST
CHOICES AND TRADE-OFFS
Our choices, or decisions, involve trade-offs
 trade-offs are all the things we give up when we
make a decision

Individuals
 Businesses
 Society/Govt


“guns or butter”: military spending vs. production of
goods
TRADE-OFF EXAMPLE

Choose to go to Disneyland

Trade-offs are:
Class
 Sleep
 Beach
 ?

THINK-PAIR-SHARE

What are trade-offs of…
Going to a movie Tuesday night
 Apple hires 1,000 new employees
 U.S. spends $5 billion on improving highways in the
Midwest

WHAT IS THE OPPORTUNITY COST?

Opportunity cost is the most desirable
alternative given up as the result of a decision


AKA: what you could have had instead (your nextbest choice)
Opp. Cost exists b/c of scarcity
DECISION-MAKING GRID
Alternatives
Sleep in
Wake up early to study
Benefits
1. Enjoy more sleep
2. Have more energy during
the day
1. Better grade on test
2. Teacher and
parental approval
3. Personal satisfaction
Decision
Sleep in
Wake up early to study
for test
Opportunity
cost
Extra study time
Extra sleep time
Benefits lost
1. Better grade on test
2. Teacher and parental
approval
3. Personal satisfaction
1. Enjoy more sleep
2. Have more energy
during the day
THINKING AT THE
MARGIN
choices aren’t always just between 2 alternatives
 Thinking at the margin is deciding to add or subtract one
unit (minute, dollar)



Ex: instead of sleep OR study, it’s how much can I have of both?
When thinking at the margin, you can find the opportunity
cost
ECONOMIC MYSTERY
"When it takes, at least, an
additional four years of schooling,
and over $100,000 in costs and lost
earnings, why would a person want
to graduate from college instead of
dropping out after the ninth grade?"
Year
1
Direct Costs of
College
$12,000
Opportunity Costs
(Lost wages)
$20,000
2
$12,500
$20,500
3
$13,000
$21,000
4
$13,500
$21,500
Total
$51,000
$83,000
Do your career aspirations require posthigh school education?
If so, what kind and for how long?
ECONOMIC TRUTHS
1. People economize. People choose the alternative which seems best to them
because it involves the least cost and greatest benefit.
2. All choices involve cost. Cost is the second best choice people give up when
they make their best choice.
3. People respond to incentives. Incentives are actions or rewards that encourage
people to act. When incentives change, people's behavior changes in predictable
ways.
4. Economics systems influence individual choices and incentives. How people
cooperate is governed by written and unwritten rules. As rules change, incentives
change and behavior changes.
5. Voluntary trade creates wealth. People can produce more in less time by
concentrating on what they do best. The surplus goods or services they produce can
be traded to obtain other valuable goods or services.
6. The consequences of choices lie in the future. The important costs and
benefits in economic decision making are those which will appear in the
future. Economics stresses making decisions about the future because it is only the
future that we can influence. We cannot influence things that have happened in the
past.