Further, it introduces the Production Possibilities Frontier, a visual model of the costs and benefits of choosing one alternative over another.
Standard 1: Students will understand that: Productive resources are limited. Therefore, people cannot have all the goods and services they want; as a result, they must choose some things and give up others. Standard 2: Students will understand that: Effective decision making requires comparing the additional costs of alternatives with the additional benefits.
Most choices involve doing a little more or a little less of something; few choices are all-or-nothing decisions. Standard 3: Students will understand that: Different methods can be used to allocate goods and services. People, acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services.
Students will be able to use this knowledge to: Evaluate different methods of allocating goods and services by comparing the benefits and costs of each method.
Session Objectives :. Handouts and Supplemental Materials. What could you be doing instead of being here for this session? List your alternatives here. What is the Opportunity Cost for a high school student to study one hour for Economics? What will confuse your students? We will continue the story of Adam and Eve in a later session.
Economics builds on ideas! Benchmarks: grade 8: Scarcity is the condition of not being able to have all of the goods and services one wants. It exists because human wants for goods and services exceed the quantity of goods and services that can be produced using all available resources. Like individual, governments and societies experience scarcity. Choices involve trading off the expected value of one opportunity against the expected value of its best alternative.
The evaluation of choices and opportunity costs is subjective; such evaluations differ across individuals and societies. Benchmarks: grade Marginal benefit is the change in total benefit resulting from an action.
Marginal cost is the change in total cost resulting from an action. As long as the marginal benefit of an activity exceeds the marginal cost, people are better off doing more of it; when the marginal cost exceeds the marginal benefit, they are better off doing less of it. Benchmarks: grade 8: Scarcity requires the use of some distribution method, whether the method is selected explicitly or not. Session Objectives : Define scarcity as the fundamental economic condition, and provide examples of the importance and implications of relative scarcity.
Develop the logic that leads from scarcity to the necessity of choice. Illustrate how the economic condition forces everyone — consumers and producers — to make choices.
Discuss how societies devise different systems of allocation to systematically address the necessity of choice. Demonstrate the subjectivity of distinctions between needs and wants. Discuss how allocation systems help people make choices. Illustrate the concepts of trade offs and opportunity cost.
These directly apply the principle of scarcity, as people have to decide, which one to choose among various alternatives while spending their time and money. The opportunity cost of choosing a project over the other, i. On the other hand, trade-off refers to all the other actions which we could be doing, apart from what we are doing. I like the clear explanation on the differences between the two terms.
The definitions also are straight forward. Thank you so much. Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. Key Differences Between Trade-off and Opportunity Cost The difference between trade-off and opportunity cost can be drawn clearly on the following grounds: The trade-off is a term used to describe the courses of action given up in order to perform the preferred course of action.
Conversely, the opportunity cost is defined as the cost of opting one course of action and forgoing another opportunity, to undertake that course of action. Trade-off refers to all the other alternatives which are foregone, to do what we want. On the contrary, the opportunity cost is the expected return on an investment, other than the existing one. A trade-off represents, what is renounced, to get what is wanted or desired.
In contrast, opportunity cost represents, what amount could be received, if the resources are put to the next-highest-valued alternative. Comments I like the clear explanation on the differences between the two terms. Leave a Reply Cancel reply Your email address will not be published. While opportunity cost is the cost of opting one course of action and foregoing another opportunity, a trade-off is the course of action given up to perform the preferred course of action. In an opportunity cost, one goes for a better alternative while in a trade-off; the belonging is sacrificed completely in the selection process of what one wants.
While the value of the opportunity cost is calculated by computing the return of the most beneficial option less the return of the preferred choice, a trade-off does not have a formula for calculation. In an opportunity cost, losses incurred are not taken into consideration. A trade-off, on the other hand, is not directly related to what one sacrificed. In an opportunity cost, a choice of better alternative is made hence more beneficial.
On the other hand, despite the fact that in a trade-off one gets what was actually demanded, the cost of other things one possesses is affected. An opportunity cost refers to the gain which was lost but could have been made because of wrong decision making.
A trade-off, however, does not compute the gain or loss but is based on factors such as choice or time. Opportunity cost and trade off are two concepts that are used in many life situations. The two concepts came about due to the concept of scarcity, as people have to decide among many alternatives in alternatives to spending their time and money.
Opportunity cost is hence the act of choosing a project over the other, while a trade-off refers to other actions which a person would be doing, apart from what one is doing. It is important to understand the difference and learn when to apply them in real life. Difference Between Similar Terms and Objects.
MLA 8 Njogu, Tabitha. Name required. Email required. Please note: comment moderation is enabled and may delay your comment. There is no need to resubmit your comment. Notify me of followup comments via e-mail.
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