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Opportunity Cost                                                                                                           period             

 

In the Prom activity we did in class, you looked at your budget and decided what to cut out of it in order to save $500 for your prom expenses.  Reflect on what you decided to give up.  The thing you love most that you gave up is called your opportunity cost.  That is the cost of your decision to go to prom.  Any time you make a decision, there is an opportunity cost.  When you decide what you will do after school today, whatever your second choice would have been is your opportunity cost. 

 

Opportunity Cost:  The value of the best alternative given up when a choice is made. 

Examples:

·         Joanna has money to buy either a DVD or a CD. She buys the DVD. The CD is the opportunity cost.

·         Steve decides to clean the gutters on his house so his Dad will pay him instead of someone else. However, cleaning gutters means he cannot go out with his friends. The opportunity cost is hanging out with his friends.

·         In order to build the new bridge, the State of Maryland decided not to buy new snowplows this year. The opportunity cost is the value of the new snowplows.

 

Assignment:  think about what you are going to do Saturday night. 

·         Make a list of the possible choices.  (If you only have one choice, make up a couple more for the sake of this activity!  J ) 

·         Choose one thing to do.  (Don’t get tricky and try to do them all!)

·         Write a paragraph explaining what choices you have, what you will do, and why that is the best choice for you. 

·         Identify the opportunity cost [remember: the opportunity cost is the value of the next best alternative – it is not all of the things you are giving up]. 

 

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

                                                                                                                                                           

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