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What you will learn ...
Opportunity cost
Take this challenge
In economics, opportunity cost is the cost in terms of the ___________________ forgone.highest valued option
1. Eason
Mary likes pop music. The order of her preference for pop singers is as follows:
2. Kelly 3. Nicholas
xample:
Suppose her mother gives her $300.
She wants to spend it on a ticket to one of the singers’ concerts. Each concert ticket costs $300.
1. Eason
Mary likes pop music. The order of her preference for pop singers is as follows:
2. Kelly 3. Nicholas
xample:
If your answer is giving up both Kelly’s and Nicholas’s concert tickets…
If she chooses to buy a ticket to Eason’s concert, what does she give up?
Incorrect! Think again !
Can she buy tickets to the two singers’ concerts if she does not buy a ticket to Eason’s concert?
+
If your answer is giving up a ticket to either Kelly’s or Nicholas’s concert...
Incorrect! Think again !
Which concert ticket will she buy if she is allowed to choose between them?
If she chooses to buy a ticket to Eason’s concert, what does she give up?
You should now realise that...
Mary only gives up Kelly’s concert ticket when she chooses to buy a ticket to Eason’s concert.
Chosen
Given up
You should now realise that...
Mary only gives up Kelly’s concert ticket when she chooses to buy a ticket to Eason’s concert.
Think zone
Q What is Mary’s opportunity cost of buying a ticket to Eason’s concert? Answer
Q Is the opportunity cost of an action measured in terms of money? Answer
Take this challenge 1
Q
Mary is considering which of three streams she should enrol in at high school.
Since there is no information on Mary’s preference, we do not know the answer.
Science stream?
Arts stream?
Business stream?
What is her cost of enrolling in the arts stream?
Take this challenge 1
Q
Science stream. Because it is the highest valued option forgone.
What is her cost of enrolling in the arts stream?
If Mary’s order of preference is as follows:
1. Arts stream2. Science stream3. Business stream
Mary is considering which of three streams she should enrol in at high school.
Take this challenge 2
Mary chooses between two options for her lunch:
Take this challenge 2
Mary chooses between two options for her lunch:
Q How will the cost of buying the sandwiches change if a fly is found in the bowl of noodles?
Take this challenge 2
If your answer is:
Incorrect! Think again !
Has the value of the highest valued option forgone changed?
Unchanged because the highest valued option forgone is still the bowl of Japanese noodles...
Take this challenge 2
If your answer is:
Unchanged because the highest valued option forgone is still the bowl of Japanese noodles...
Although the highest valued option foregone is still the bowl of Japanese noodles, the value of that bowl of noodles has decreased.
You should recall that when the value of the highest valued option forgone changes, the cost will change too.
Hence, the cost of buying the sandwiches will be ____.lower
Take this challenge 3
Q How will the cost of buying the sandwiches change if they do not taste the way she expected?
Take this challenge 3
If your answer is:
Incorrect! Think again ! Has the value of the highest valued option forgone changed?
Lower because the value of the sandwiches becomes lower...
Take this challenge 3
You should recall that when the value of the highest valued option forgone remains unchanged, the cost will change / will not change.
If your answer is:
Lower because the value of the sandwiches becomes lower...
Take this challenge 3
If your answer is:
Lower because the value of the sandwiches becomes lower...
Although the value of the sandwiches is lower, the value of the bowl of Japanese noodles _______________. remains unchanged
Take this challenge 4
Back to the concert ticket example.
If Mary can buy a ticket to Kelly’s concert at a 50% discount, will her cost of buying a ticket to Eason’s concert change?
50% off
Q
Take this challenge 4
If your answer is:
Incorrect! Think again!
Has the value of the highest valued option forgone changed? How many tickets to Kelly’s concert does she have to give up?
No, because the price of a ticket to Eason’s concert remains unchanged...
Take this challenge 4
If your answer is:
No, because the price of a ticket to Eason’s concert remains unchanged...
Mary has to give up ___ tickets to Kelly’s concert now.
two
X 2
Take this challenge 4
If your answer is:
No, because the price of a ticket to Eason’s concert remains unchanged...
The cost of buying a ticket to Eason’s concert _______ although the price of it remains unchanged.
increases
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