Opportunity Cost

Grades: 3 to 6
Class Time: 1 hour

Guiding Questions: What is opportunity cost? Why is there cost in every economic decision?
Outcome: Students should be able to give an example and use the term “opportunity cost.” For example, suppose you have one dollar. There are five different items that cost one dollar each. Rank the five items from your first choice to the fifth choice. The “opportunity cost” of purchasing your first choice is the value to you of the second choice.
Objective: After reading and discussing the book, Alexander, Who Used to be Rich Last Sunday, students will list Alexander’s opportunity cost(s) and discuss. Students will make up their own story of how they would have spent the money.
Core Competencies: Sharing earth-space with others: the community.
Procedure:
1. Make a bulletin board using the picture of Alexander from More Than Money, by Lorene Renie Lenning, Scott, Foresman and Company, 1990.
2. Read the book, Alexander, Who Used to be Rich Last Sunday, Aladdin Book, MacMillan Publishers, New York, 1978.
3. Discuss with the whole class the term opportunity cost and how it relates to the book mentioned above. Review other terms necessary for understanding concept (see related skills section below).
4. With the help of the entire class, make a graph of how Alexander spent his money. Put graph on bulletin board.
5. Put students in small groups and ask them to make a list of Alexander’s opportunity cost(s). Discuss and put their responses on the board.
6. Have students make a list of how they would have spent the money.
What opportunity costs were involved? Next, have them write a story
from their list. Put stories on bulletin board.
Materials/Resources: Picture of Alexander; Book, Alexander, Who Used
to be Rich Last Sunday
, Aladdin Books, MacMillan Publishers, New York,
1978; pencil, paper, crayons and /or markers.
Evaluation: Students’ ability to identify opportunity cost (#6). Original story about how they would have spent the money in the story.
Extensions: Have students discuss what they might have to give up to buy certain items they wish to purchase when funds are limited. Have students list ways which they have personally experienced opportunity costs and tell what factors influence these costs. Have students identify strategies for making choices on how to spend money when shopping. What are “wrong” choices that affect individuals and communities?
Vocabulary: Opportunity costs are the greatest opportunity loss. For example, suppose you have one dollar. There are five different items that cost one dollar each. After ranking the five items from your first choice to the fifth choice, the “opportunity cost” of purchasing your first choice is the value to you of the second choice.
Related Skills: The students should have had some previous experience
with economic concepts such as needs, wants, goods, services, scarcity, shortage, and the terms consumer and producer.
References: Lenning, Lorene R. (1990). More Than Money – An Activities Approach to Economics. Glenview, IL: Scott, Foresman, and Company, and Viorst, Judith (1989). Alexander, Who Used to be Last Sunday. Aladdin Books, MacMillan Publishers, New York, 1978.
Source: Edwards, Cindy and Murphy, Carole (1995). Elem. Educ. 253,
Social Studies Methods, Univ. of Mo., St. Louis.