Economics 12 Name:____________________
Opportunity Cost
Review: What are the 3 factors of production?
1.
2.
3.
Focus Activity: Identify five appealing vacation destinations.
1.
2.
3.
4.
5.
You can choose just one. Explain your choices and describe what
you gave up by choosing that vacation over others.
Vocabulary:
Trade off- All the alternatives we give up whenever we choose one
course of action over another.
Guns or butter- a phrase that refers to the trade off that nations
face when choosing whether to produce more or less military or
consumer goods
Opportunity cost- The most desirable alternative given up as the
result of a decision
Thinking at the margin- deciding whether to do or use one
additional unit of some resource
Hotels in Washington DC selling tickets- wait in line for hours or
pay $5 extra dollars to the hotel
If you choose to spend more time at work you give up watching
football or going out to the movies. (Individuals)
How do businesses decide to use land, labor and capital—if you
plant broccoli, you cannot grow cauliflower too.
Countries make the same decisions. Guns or Butter? More
military goods= less consumer goods. Remember—resources are
limited!
The most desirable alternative given up as the result of a decision
is called the OPPORTUNITY COST
Thinking at the margin = When you decide how much more or
less to do…simply enough you are thinking about using one
additional unit (lined paper example)
What will you sacrifice and what will you gain? Once the
opportunity cost outweighs the benefits then no more additional
units should be added.
Opportunity Cost—Safety at Any Cost? Case study on page 19.
Can you think of any opportunity costs related to air travel
safety?___________________________________________________