Opportunity Cost Work Sheet Opportunity cost is one of the most important concepts in economics and is the basis of all economic decision making. The definition of opportunity cost is the value of any alternative you must give up when you make a choice. More specifically, it is the value of the next best alternative. Because resources are scarce a person is forced to make many decisions throughout their life. Whenever a person makes a decision they are choosing one action instead of other alternatives. For example, after school you can play video games, study, watch television or go to sleep. Even when YOU are completely UNAWARE of it, you are constantly making decisions and there is both an opportunity cost and opportunity benefit of each decision. Opportunity cost/benefit analysis is the basis of economic decision making and a concept you will employ throughout this course and your life! This class is designed to make you more CONSCIOUS of your decision making process and the resulting opportunity costs and benefits. Cost/Benefit Analysis Examples: 1) You are in a clothing store and like a pair of pants and a T-shirt. You only have enough money for one item of clothing. You decide to buy the pants. What is the opportunity cost? 2) You decide to play baseball this spring instead of working at a part time job in a computer store. List several of the opportunity costs of choosing to play baseball instead of working. 3) You have tickets to the 49ers game on Sunday and you have an invitation to a friend’s party. You cannot go to both. You choose to go to the party. What is the opportunity cost? What is the risk in your decision? 4) You decide to attend college next fall. List 3 or more trade offs (positive and negative) of attending college next fall. Positive Trade Offs 1. ___________________ 2. ___________________ 3. ___________________ 4. ___________________ 5. ___________________ Negative Trade Offs 1. __________________ 2. __________________ 3. __________________ 4. __________________ 5. __________________