Unit: Understanding Basic EconomicsDay:Four (4)
Topic: Opportunity vs. Actual Cost
Class:Economics
I.Objectives:
Students will be able to:
1.Define the concept of Actual Cost in their own words.
2.Compute the actual costs associated with buying and owning a new car.
3.Define the concept of Opportunity Cost in their own words.
4.Give examples of the opportunity costs created from the decisions they made on how to spend their free time on the previous day.
5.Differentiate between opportunity costs and monetary/actual costs when presented with different situations and examples.
6.Evaluate the costs and benefits associated with the alternative choices made on the usage of land in a specific area.
II.Materials:
2.Grouping arrangement for 3-4 person groups
3.Handout #1:Opportunity vs. Actual Cost
4.Handout #2:Developing Estoria - Instructions
Developing
Estoria - Proposals
1.Ask students what costs are associated with buying and owning a new
vehicle.
Expected responses:
--Price of vehicle
--Tax
--Insurance
--Gasoline
--Maintenance Costs
2.After discussing the various actual/monetary costs associated with owning a new car, explain to students that there are other costs involved with the decision to buy and own a new vehicle: opportunity costs.(If a student should answer the previous question with an opportunity cost, use their example as a transition to introduce the concept of opportunity cost.)
3.Explain to students that todays lesson will focus on the differences in Actual costs and Opportunity costs.As the lesson goes on, students will be able to consider the opportunity costs (in addition to the actual costs) associated with making different decisions.
B.Body of Lesson:
1. Discuss the concept of Opportunity Cost: Ask the class if they can define what opportunity costs are.Discuss their responses and come up with a formal definition which can be written on the board.Ask students to look at the example of buying and owning a new car.Now that students have a formal definition of the concept of Opportunity Cost, ask them to apply it by giving examples of opportunity costs associated with the buying and owning of a new car.
Expected Responses:
--Alternative uses for the down payment of the vehicle.
--Alternative uses of the time associated with owning a new car
(time at a job to pay for the carect.)
2.Explain to students that there are opportunity costs associated with every decision we make (even if there are no actual costs involved).To demonstrate this, ask students to recall how they spent their free time after school the previous day.Then ask them to come up with some of the opportunity costs associated with the decision they made on how they spent that time.
3.Break students up into small 3-4 people groups. Give students Handout #1.Ask them to analyze the different scenarios and list the various actual costs and opportunity costs associated with the decisions made in the scenarios.
4.After giving the groups ample amount of time to list the actual and opportunity costs associated with handout #1, go around the room and randomly ask groups to explain what costs they found with the decisions.
5.While students are still in their groups, pass around Handout #2.Explain to the students that they are sitting on the Board of City Planning for the City of Estoria. Explain to them that there is a certain plot of land being considered for various uses. Have them examine the plot of land and develop a plan for how the land should be used. Tell the students that they will be expected to explain and justify their plan.
6.When
students have completed the assignment, have each group present their plan
to the class. Have them explain
and justify their decision on how to use the land.
1.Review the concepts of Actual and Opportunity Costs. Ask students if they have any questions concerning the two concepts.
2.Discuss the difficulties large organizations (such as governments) have with making decisions when many opportunity costs are involved.
3.Announce
to students that tonights homework assignment will be to weigh the decision
of attending college after high school or becoming part of the work force
by getting a full time job. Explain
to students that they must develop the costs (both actual and opportunity)
and benefits of BOTH sides of the question. After
determining the costs and benefits, they must write a brief essay explaining
what their decision would be and why.
Student mastery will be assessed by their ability to apply the concepts to the assignments, particularly the homework assignment. Students will also be evaluated by their ability to demonstrate an understanding of the concepts on a short answer/essay style test.