The big ideaThe cost of a choice is the next best thing you give up.
How it works
Sam had eight coins and a free afternoon. A boat kit cost eight coins, art pens six and a sticker book two.
The coins would buy the boat kit, or the pens and the book, but not all three.
Sam picked the boat kit. What was given up is not everything at the fair, only the next best choice: the pens and the book. That is the opportunity cost.
Time has a cost too. The afternoon on the boat meant no football with friends. Ana picked the pens and the book, so for her the boat kit was the cost.
What each thing costs.Sam's list, best first.The same coins, a different cost.
Example 1: What fits in 8 coins
The pens cost 6 and the book costs 2.
6 + 2 = 8
The pens and the book together cost 8 coins, the same as the boat kit.
Example 2: What does not fit
The boat kit and the pens cost 8 + 6 = 14 coins.
Sam has only 8 coins.
So Sam cannot buy both.
Example 3: Sam's cost
Sam's list, best first: the boat kit, then the pens and the book, then saving.
Sam picks the boat kit.
The next best choice is the pens and the book: that is Sam's opportunity cost.
Example 4: A cost in time
The boat takes the whole afternoon.
Football with friends was the next best use of it.
So the boat cost 8 coins and a football game.
Example 5: Ana's cost
Ana also has 8 coins and buys the pens and the book.
For Ana the boat kit was the next best choice.
The same coins, a different cost.
Words to know
opportunity cost
The next best thing you give up.
choice
Picking one thing when you cannot have everything.
next best
The one that comes second on your list.
afford
Have enough coins to buy it.
Watch out
The cost is the next best thing you give up, not everything else.
The thing you choose is not its own cost.
A toy in a shop you never saw is not a cost, because it was never on your list.
Time has a cost too, as well as coins.
Try it
Sam picks the boat kit. What is the opportunity cost?
Can Sam buy the boat kit and the sticker book with 8 coins?
Ana buys the pens and the book. What is her cost?
What question helps you find your cost?
Answers: 1. The pens and the book · 2. No · 3. The boat kit · 4. If I skip this, what would I pick instead?
Try at homeWith a grown-up, talk about a choice they made with their time or money. Ask what the next best choice was, the one they gave up.
For grown-upsTalk about a choice your family made with time or money and ask what the next best choice was, the one given up. Every choice has an opportunity cost, which is fine.
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