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My Five Cents: What is opportunity cost?

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My Five Cents: What is opportunity cost?

SUBJECTS:  Economics, Maths

YEARS:  7–8, 9–10


What is the true cost of buying something?

Gen Fricker explains that it's more than just money. Learn about opportunity cost — what it is, why it's a helpful tool and when to use it. Simple!

Then test yourself with ASIC Moneysmart's "Things to think about" classroom exercises.


Things to think about

  1. 1.Define needs and wants. Think about what you own. Could you categorise your possessions into needs and wants? Does your categorisation match with the definition above?
  2. 2.List the terms that stand out to you as you watch the video. For example: budget, opportunity cost, needs and wants. Are there any terms from above that are unclear and need to be investigated further?
  3. 3.

    Use the ASIC Moneysmart Budget Planner to complete the following exercises.

    Q1: Choose a purchasing decision you’ve made recently or need to make. You can use Mario’s scenario too. Write a list of the opportunity costs for choosing each option.

    Q2: A budget can help making purchasing decision. It can provide a clear view of limits in spending and the opportunities to save further. Download the Excel file from the Budget planner page. Use the information provided to fill out the spreadsheet. Mario writes a list of his income and expenses. (a) Use this information provided by Mario to fill out the Budget Planner Excel spreadsheet. Income and Expenses Take home pay after tax: $750 per week Rent: $400 per week Electricity bills: $150 per quarter Pay for streaming services: $20 per month Internet: $70 per month Mobile: $50 per month Groceries from the supermarket: $200 per week Clothing: $200 monthly Gym membership: $16 per week Gifts and celebrations: $500 annually Transport card: $50 per week Movies: $30 per month (b) Scroll down the Excel spreadsheet to view a visual representation of Mario’s income and expenses. Describe the changes to his budget if Mario earns $50.00 more every week.

    Q3: Your turn! Record your expenses and income for the week and develop your own budget using the Budget Planner. Write 3 statements on how creating a budget helps you make purchasing decisions. Share your statements with the class. 


Teachers

ASIC Moneysmart Teaching:


Acknowledgements

The learning materials provided with this video were created by ASIC Moneysmart.


Production Date: 2019


Copyright

Metadata © Australian Broadcasting Corporation 2020 (except where otherwise indicated). Digital content © Australian Broadcasting Corporation (except where otherwise indicated). Video © Australian Broadcasting Corporation (except where otherwise indicated). All images copyright their respective owners. Text © Australian Broadcasting Corporation and ASIC.

Posted , updated