Opportunity Cost

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Learning Goals/Objectives: 
  • Students will demonstrate an understanding of how to make good choices by understanding values, opportunity cost, delayed and instant gratification.
  • Students will correlate the how the choices they make now effect opportunity in the future.
  • Students will understand the time value of money.
  • Students will be introduced to a semester long tacking of expenses and revenue.
Grouping of Students: 
  • Individual
Methods: 
  • Graph & ‘In-Out’ list
  • Computer Assisted Learning (Visual)
  • Direct Instruction (Auditory)
  • Inquiry Questioning (Active)
Activities: 

“Hook” (Bell Ringer) – If I gave you a choice to take a
million dollars right now, or to start with a penny today which would double
everyday for thirty days and you could take the sum - - which would you take?
($10,737,417 if you allow the penny to double) – This is a fun example of
delayed gratification, and it an even better example of why you should think
through how you should spend your money.

a. Direct Instruction/Inquiry Questioning (take notes) – 15
minutes

  •  Values – the
    beliefs and practices in your life that are very important to you
  • What do you value the most that has a financial price tag
    attached to it? (Ask various students)
  • Based on this discussion, do you spend your money
    consistent with your values? (Ask various students)
  • Why not? (Leading Question into gratification, which you
    define and provide examples for)
  • Instant Gratification – An unwillingness to give up something now in return for
    something later
  • Delayed Gratification – A willingness to give up something now in return for something later

b. Computer Assisted Learning – 10 minutes

  • If you had a choice of spending the next 30 years of your
    life driving a nice midsize car, or driving a ‘junk’ car for the next 30 years
    and having nearly one million more dollars - - which would you choose? (Use the
    following financial calculator http://www.planningtips.com/cgi-bin/roth.pl
    to illustrate the opportunity cost of the expense of making car payments and
    paying full coverage insurance for 30 years, compared to investing that same
    amount of money and receiving a return of 8%)
  • Now, I am not telling you that driving a car is wrong, what
    I am challenging you to consider when spending money is ‘opportunity cost’
  • Opportunity Cost – By choosing one option you are giving up another.

It’s hard to spend money consistent with your values because
the things you value the most are expensive - and it takes disciple to delay
your gratification.

c. ‘In-Out’ List – 10 minutes

  • Develop a list of products or services that you currently
    buy, and place them on either the ‘In’ or ‘Out’ side. If it is on the ‘Out’
    side, that means that based on opportunity cost, you feel that your money could
    be best served elsewhere. Use the same financial calculator as before to
    determine what everyone’s opportunity cost is.

d. Worksheet Review – 10 minutes

  • Distribute ‘Semester Revenue & Expenses’
    Worksheet. The students are to track what they make (including allowance) and
    spend (excluding school lunches) for the semester. The worksheets are due at
    the end of the semester. They are worth 50 homework points.

Materials: 
  • Copies of ‘Semester Revenue & Expenses’;
  • Computer/Internet for the instructor
Assessment: 
  • Revenue & Expenses Worksheet - 50 homework points
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