Scarcity and Opportunity Cost
Part 1
Directions: In the first assignment of the course, you considered how much money you would make in your dream job as well as how much it would cost to live. You then thought about the tradeoffs that were involved. Economists like to quantify tradeoffs using opportunity costs, which you learned about in this past module. In the following exercise, you will practice calculating opportunity costs yourself.
Make a list of some of the things you want right now. Maybe it’s a new pair of shoes, a new phone or computer, or tickets to a concert or theme park. Now, imagine you were gifted $1000. How would you choose to spend it?
Explain how you would split up the $1000. You can choose to save some of it, but you must choose to buy at least two things. (5 points)
Once you do this, choose two of the items and calculate their opportunity cost. To do this, you need to figure out how much of one item you could buy using the money you’d spend to buy the other. (10 points)
The easiest way to do this is to divide the costs. Let’s say that I am torn between buying a $20 CD or a $40 pair of shoes.
If I want to figure out the opportunity cost of buying the shoes, I would divide the cost of the shoes by the cost of the CD. $40 divded by $20 is 2.
Therefore, if I choose to buy a pair of shoes, then my opportunity cost of buying the shoes is 2 CDs, because I could have purchased 2 CDs with the money I spent buying the shoes.
What would you ultimately end up buying? What are the tradeoffs of the decision you made? In other words, what are the pros and cons of the choice? (5 points)
Part 2
Directions:
Now that you’ve had some practice with opportunity costs and tradeoffs, we are going to push the boundaries of this exercise a bit further. Imagine you can choose three options: going to college, going to trade school, or going straight into the workforce.
Answer the questions below.
Imagine you have three choices of post-high school career choices:
Go straight into the work force and earn $34,464 a year. You will not go into debt for doing this.
Go to a four-year university and earn $57,072 a year. Based on the first assignment of the course, you will also gain $80,000 in debt this way.
Go to a trade school and earn $38,352 a year*. Based on the first assignment of the course, you will also gain $33,000 in debt this way.
*This figure is based on an associate’s degree level of education, so this could be very different depending on the career you choose.
What are the tradeoffs of choosing one option over the other?
Write a response for all three combinations: going into the workforce versus a four-year university, going into the workforce versus a trade school, and going into a four-year university versus a trade school.
Part 3
Directions:
Now that you’ve practiced calculating various opportunity costs and tradeoffs in different scenarios, respond to the following reflection question.
What do you think you prioritize most in making tradeoff decisions? Do you think about getting the best deal possible, or do you think about getting the item you want the most?
When thinking about the financial impact of your job choices, what are you considering – the cost of training, the lifestyle you’ll be able to afford, etc.?
Last Completed Projects
| topic title | academic level | Writer | delivered |
|---|
