Activity:  A Day of Choices

Lesson Overview:

Students learn to identify alternatives and opportunity costs by looking at the journey of choices they make as they go through a typical school day.  Students learn to distinguish opportunity costs from consequences. In the process, they begin to recognise that all decisions involve costs, and that economic reasoning is therefore applicable in all situations, even those which may, at first glance, seem not to be “economic” decisions.

Economic Concept:

• Opportunity cost

Economics Content:

Scarcity:  Productive resources are limited. Therefore, people cannot have all the goods and services they want; as a result, they must choose some things and give up others.

Key Points:

• Whenever a choice is made, something is given up.
• The opportunity cost of a choice is the value of the best alternative given up.
• It can be given a monetary value.
• Choices involve trading off the expected value of one opportunity against the expected value of its best alternative.
• The evaluation of choices and opportunity costs is subjective; such evaluations differ across individuals and societies.
• Choices made by individuals, firms, or government officials often have long-run unintended consequences that can partially or entirely offset the initial effects of their decisions.

Time required:

• I hour

Plan:

Part 1

1. Introduce the concept of opportunity cost to students by developing the following example in a large-group, interactive discussion.
   • When your alarm went off, or someone called you, what choice did you face this morning?
     • Accept a variety of answers and list them on the board. Then, ask students to reduce the choice to the two best alternatives. Essentially, these are: to get up or not get up . (Note that not getting up doesn’t mean “never”;” it means not getting up right then.)
   • Why did you have to make this choice?
     • You are limited in the ways that you can use your time. You can’t get up and stay in bed at the same time.
   • Let’s list your two best alternatives on the board, and discuss the benefits of each.

1. • Suppose you decide to get up now. What benefits do you give up?
     • the benefits of getting up later – more sleep and staying warm
   • Suppose you decide to sleep longer. What benefits do you give up?
     • the benefits of getting up now – not having to hurry, review time, coffee and a bagel
     • Opportunity cost is what you give up (the benefits of the next best alternative) when you make a choice.
   • Another way to look at it is that the benefit of making a choice becomes the opportunity cost of not making the choice.
   • Note: Students will try to bring consequences into the discussion. For example, it may be true that because you decide to sleep in, you drive faster to get to school and get in an accident. While accepting the increased risk of an accident is a part of the decision process and therefore an opportunity cost, an actual accident is a consequence rather than an opportunity cost. In identifying opportunity costs, encourage students to focus on the choice itself and the benefits of the alternative, not on things that might come into play later.
2. Direct students to work with a partner. Post the following list of choices on the board or overhead:
   • eat breakfast
   • take the bus
   • walk with your friend to class and arrive late to your own
   • go out to lunch
   • cut your last class
   • go in after school for help in physics
   • Directions to student pairs: Choose 3 entries from the list. For each entry:
     • identify the next-best choice
     • list the benefits of each of your two alternatives
       • for example, what are the benefits of eating breakfast? what are the benefits of skipping breakfast?
     • compare notes with your partner on which choice you would make
     • discuss how you and your partner valued the costs and benefits differently
       • did you and your partner make the same choice? why? why not?
       • did you and your partner make the same choice in a situation, but for different reasons?
3. Allow students to share their responses with the large group. Ask them to generate some generalisations about cost. Post these on the board. Emphasise:
   • Choosing is Refusing – what are the benefits you are refusing by making the choice? The benefits you refuse are the opportunity cost of your choice.
   • People’s values differ. Individuals will place different value on the relative benefits of a set of alternatives and will thus make different choices.
     • (Note: Benchmarks for Economics Content Standard 1 include: The evaluation of choices and opportunity costs is subjective; such evaluations differ across individuals and societies.)
   • People can’t escape opportunity costs – they are an inherent part of all decision- making.
   • Is it ever really true that you “don’t have a choice”? Suggest an alternative saying that more accurately reflects reality.
4. What happens when we change the benefits and costs of a situation?
   • Suppose the alarm rings on a Saturday morning when you hope to go skiing with friends.
   • Are the alternatives the same ? (yes – get up, or sleep more)
   • Are the costs and benefits the same? (no – start with benefits, so that students get into the habit of seeing that opportunity cost is the benefits foregone)
5. Go back to your list with your partner. Choose one of the items from the list.
   • What circumstance(s) might change the benefits and/or costs of that situation?
   • How would they change?
   • Would your choice change? Why or why not?
6. Share team examples with large group. Debrief.
7. (optional) Extension for economics classes or students interested in pursuing investigation of the value of the concept of opportunity cost as a tool for analysis of human behavior.
   • Briefly list the journey of choices you made today and identify the opportunity costs you’ve chosen to bear.
   • For each decision you made, rate the opportunity cost as high or low.
   • Rate your day so far – good day or bad day?
   • What’s the relationship between good day / bad day and high vs. low opportunity cost? (Do good days have high or low opportunity costs?)
   • (Key point: Careful thought reveals that, although it is counter-intuitive, good days have high opportunity costs. The thinking is this. If you were willing to bear high costs, the benefits you received were even higher, in your estimation, or you would have made a different choice.)
   • Is there an exception to this relationship rule?
   • (Yes, the rule breaks down when your initial assessment of the costs and benefits – your assessment at the time of decision – is faulty, either because you make a mistake or because you have insufficient information.)
   • Note: Some students may find this type of analysis useful in considering the historical choices  their own political leaders have made – for example the decision to go to war in Iraq in 2003, especially in helping them to see that faulty information or the mental filter of dedication to an idea (Weapons of Mass Destruction) may cause people to perceive costs and benefits inaccurately.

Source (adapted): http://www.fte.org/teacher-resources/lesson-plans/edsulessons/lesson-1-opportunity-cost/