1.2 Opportunity Cost Essential Question: How do we make decisions incorporating tradeoffs and...
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Transcript of 1.2 Opportunity Cost Essential Question: How do we make decisions incorporating tradeoffs and...
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1.2 Opportunity Cost
Essential Question:How do we make decisions incorporating
tradeoffs and opportunity costs in our daily lives?
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Economic Choice
Incentives: Encourage a
particular choice
Utility: benefit (satisfaction) derived from that choice
Economizing: Balancing costs and benefits of
choiceTrade-offs:
choice alternatives;
opportunity costs
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Opportunity Cost
“It’s much easier for me to make major life, multi-million dollar decisions, than it is to decide on a carpet for my front porch.”
~ Oprah Winfrey
What makes some decisions easy and some more difficult?
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Cost – Benefit AnalysisMoney Time Where will I
live?Family/ Friends
Goals(Long term/ Short term)
Work Full Time
2-yr College(Full time)
4-yr College (Full time)
Work part-time; School part-time
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Cost – Benefit Analysis
• Write a paragraph in which you analyze your data from your decision-making grid. Include the following– Write one or two sentences that summarize the
trade-offs you will have to make as you consider what you will do after high school.
– Write one or two sentences that describes your opportunity cost.
– Write a concluding sentence or two stating your decision.
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Discussion
• What incentives and utility did you consider in making your decision?
• How does your choice represent the best mix of costs and benefits for you?
• How does this exercise represent the idea that there is “no such thing as a free lunch”?
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Marginal Cost (how much would it cost you to get the next degree?)
Marginal Benefit (How much satisfaction would you receive by adding an additional degree?)
High School diploma $668/week
Training Program (1-year or less)
$741/week Est. $1,500- $3,000
2-year degree (Associate’s) $792/week 3,347
4- year degree (Bachelor’s) $1,101/week 9,139
Master’s degree (typically 2 years past Bachelor’s)
$1,326/week 15,000 (based on 30 credit hours at $500/credit hour)
Doctoral/Professional (at least 8 years total)
$1,600/week Est. 45,000 (from Capella)
Marginal cost and benefit from adding more education
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