Opportunity Cost Lesson Plan

Instructor: Kevin Newton

Kevin has edited encyclopedias, taught middle and high school history, and has a master's degree in Islamic law.

Your students face tough decisions all the time. This lesson plan on opportunity cost will show them how the decisions they face now have costs that are both explicit and implicit. Find a video lesson that explores the concept of opportunity cost as well as an activity that walks students through the different kinds of opportunity cost analysis.

Lesson Objectives

By the end of this lesson, students should be able to do the following:

  • define 'opportunity cost'
  • analyze courses of action with respect to opportunity cost

Length

60 minutes

Curriculum Standards

  • CCSS.ELA-LITERACY.RH.11-12.7

Integrate and evaluate multiple sources of information presented in diverse formats and media (e.g., visually, quantitatively, as well as in words) in order to address a question or solve a problem.

  • CCSS.ELA-LITERACY.RST.11-12.3

Follow precisely a complex multistep procedure when carrying out experiments, taking measurements, or performing technical tasks; analyze the specific results based on explanations in the text.

  • CCSS.ELA-LITERACY.RST.11-12.9

Synthesize information from a range of sources (e.g., texts, experiments, simulations) into a coherent understanding of a process, phenomenon, or concept, resolving conflicting information when possible.

Key Vocabulary

  • Utility
  • Opportunity cost
  • Explicit costs
  • Implicit costs

Instructions

  • Start by asking if students ever had an allowance. Ask them how they handled making financial decisions based off of their weekly income.
  • Then watch the lesson Opportunity Cost: Definition, Calculations & Examples, pausing for key terms and the following points to ensure understanding:
    • 2:24 - What is utility? What about opportunity cost? Have students provide decisions they make that require them to weigh opportunity costs.
    • 4:21 - What is an implicit cost? What about an explicit cost? Ask students to provide examples of each.

Activity

  • Write the following pairs on the board:
    • Eating salad vs. eating steak
    • Studying vs. going out with friends
    • Going to college vs. getting a job
    • Working out vs. studying
    • Playing rugby vs. joining the glee club
  • Within the pairs, neither of the choices might be categorized as a 'bad idea.' Have students remind you of the definition of 'explicit opportunity cost.' Write their definition on the board.
  • Ask students to estimate the explicit costs of each course of action (i.e. the monetary cost). Write their ideas on the board next to the corresponding pair.
  • Now ask students to come up with implicit opportunity costs for each. Are there more than one? Does each implicit cost carry the same weight as the next? Again, write key responses on the board.
  • Go through each of the pairs and have students vote on their choice of action. Were there any clear winners? Losers?

Discussion Questions

  • Why should people look at the opportunity cost of an action?
  • How can we use opportunity cost in a non-monetary context?
  • What is the opportunity cost of showing up to class? What is the opportunity cost of not showing up to class?
  • What are some reasons that companies and individuals should be aware of opportunity costs?
  • How do you think opportunity costs affect the macroeconomics of a nation?
  • How might opportunity cost affect comparative advantage?

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