Lesson 2, Part 2: Teach

You can meet your economic wants by trading for goods and services. But remember, you probably have many things you want. So, you have to make choices about which goods and services you will trade for and which you will give up.

You make a choice to buy a good or service. Then someone has to sell you the product. But first, someone had to make the product. Making the product meant using a worker's time and skill. Maybe the worker needed a machine. The person might have worked in a building. Of course, the building sat on some land. Let's say that a seller believes that buyers like you want to buy the seller's product. Then the seller will hire the workers, buy the machines, build the building, and buy the land. But what if buyers do not want to buy the product? Then the seller can use the workers, machines, building, and land to make different things.

So, buyers are not the only ones who must make choices. Sellers make choices, too.

A simple example of a choice is having to pick between two things. Making a choice means that you pick one of the things. When you pick one thing, you give up the other thing. Let's say that your school lunch comes with either an apple or an orange. You can only have one piece of fruit. If you pick the orange, you give up the chance to pick the apple. You had the opportunity to pick the apple, but you did not make that choice.

Every good or service has a worth to the person who buys it. Getting that worth is the reason that you want to buy something. But here is the surprise! The thing that you do not pick also has a worth. At lunch, you picked the orange because of its worth. But the apple that you did not pick also has a worth. The opportunity cost of a choice is the worth of the thing given up. Both buyers and sellers think about opportunity cost when they make choices.

Buyers are people whose wants are satisfied by using goods and services. Buyers are also called consumers. Buyers compare the worth of each choice. To choose between an apple and an orange, you think about the worth of each. The worth for the orange is greater than the worth for the apple. What would you do? You would pick the orange. Its worth is more than its opportunity cost.

Sellers are people who make goods and provide services. Sellers are also called producers. Sellers compare the worth of each choice. The choices of buyers matter. Buyers really want oranges, but a store sells apples. Then the store loses the opportunity to sell oranges. The opportunity cost to keep selling apples goes up. Stores will start putting out fewer apples. All around the world, more workers and land will be used for oranges and less for apples.

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Teacher's Notes

Teach

This lesson's goal is to get students to understand the implications of making consumption choices. Consumption affects production and the use of resources such as workers, machines, buildings, and land.

Emphasize the definitions of opportunity cost, consumers, and producers. Ask the students for examples to get a sense of student understanding of opportunity cost.


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