Scarcity, Choice, and Scarcity, Choice, and Opportunity CostOpportunity Cost

Teaching economic concepts

What is opportunity cost? What is opportunity cost?

Opportunity Cost: The second-best alternative (or the value of that alternative) that must be given up when scarce resources are used for one purpose instead of another.

Scarcity, Choice, and Opportunity Cost

What is Dilbert’s opportunity What is Dilbert’s opportunity cost?cost?

Time of your Life Time of your Life - Green Day- Green Day

The lyrics in this songs can assist learners in understanding the economic concepts like opportunity cost.

Click on the title to play the song.

Prof. Opportunity Prof. Opportunity Cost InterviewsCost Interviews

This video can also assist learners in understanding opportunity cost.

Click on the title to play the video.

ActivityThis activity is used to reinforce the concept of opportunity cost.

The value of time is often under-appreciated. Consider the true cost of traveling from Las Cruces to San Francisco, CA by plane or by bus.

How do we need to answer this problem?

Determining the Opportunity Cost

The financial cost of the plane ticket ($400) versus the bus ticket($200).

The bus is cheaper so does this mean taking the bus is the right decision?

Determining the Opportunity Cost

The financial cost of the plane ticket ($400) versus the bus ticket($200).

The bus is cheaper so does this mean taking the bus is the right decision?

Determining the Opportunity Cost

The time spent traveling (each way) – 4 hours (plane) versus 24 hours (bus)

The value of a person’s time - $8/hour

Should they take the plane or the bus?

Determining the Opportunity Cost

Plane Bus

Tickets $400 $200

Time/hr + 8 + 48

Value/hr. X 8 X 8

$64 $384

Total O. C. $464 $584

Think – pair – sharePartner listing next slide.

In the previous example suppose that you did not know the value of the person’s time.

1. Find the pay/hour that makes the plane and bus travel equally attractive (hint: knowing a little algebra might help).

2. Contact your partners through Skype or another mutually agreed upon method. Solve the problem. Show all steps.

Think – pair – sharePartner listing next slide.

Next …

3. Create a similar problem for determining opportunity cost. Find the number that makes both alternatives equally attractive. Submit together on the discussion board with the first problem.

4. Answer at least two other of your classmates problems.

1 2 3

Bustillos & M. Cruz

Fort-La Victorie & Lyons

Moraveg & Quintana

Buynar & Davis Larios & Moraveg

Rinkels & White

Christian & Eidemiller

Lyons & Murphy

Schaub & Williams

Elder & Kirkpatrick

Mancera & Nagel

Stiles & Wilson

Flowers & Larios

Martin & Powers

Bussmann & Veazey

Pair partners (for illustrative purposes only)

References

Lawrence Economic Blog. (2011). Dilbert and the opportunity cost of time. Retrieved from http://blogs.lawrence.edu/economics/2011/10/dilbert-and-the-opportunity-cost-of-time.html

Mateer, D. (2011). Office hours: The opportunity cost of seeing President Obama. Retrieved from https://www.youtube.com/watch?v=MQfxVGcuOj4

Mateer, D. (2014). Opportunity cost: what you would be doing if you weren’t doing this! Retrieved from http://dirkmateer.com/topic/Opportunity+Cost

ORoark, B. (n.d.). Time of your life – Green Day. Retrieved from https://www.youtube.com/watch?v=MQfxVGcuOj4