opportunity cost homework assignment

Real-Life Examples of Opportunity Cost

What do economists think about strawberry smoothies? That depends on how good the kiwi flavor is instead—plus a range of other choices. Which stirs up the idea of opportunity cost.

How is opportunity cost defined in everyday life?

“Opportunity cost is the value of the next-best alternative when a decision is made; it's what is given up,” explains Andrea Caceres-Santamaria, senior economic education specialist at the St. Louis Fed, in a recent Page One Economics: Money and Missed Opportunities .

The Scoop on Scarcity

We can’t have everything we want in life. This is where scarcity factors in. Our unlimited wants are confronted by a limited supply of goods, services, time, money and opportunities. This concept is what drives choices—and, by extension, costs and trade-offs, Caceres-Santamaria says.

She uses the example of deciding to buy a $7 smoothie at the mall. She notes that many people would view the choice as a single one based on whether you want the drink.

Instead, she suggests wearing “a unique pair of ‘economist glasses’” to see the decision differently, asking:

• How much do I value this?
• What am I giving up now to have this?
• What am I giving up in the future to have this now?

Costs That Are Seen and Unseen

Our inclination is to focus on immediate financial trade-offs, but trade-offs can involve other areas of personal or professional well-being as well—in the short and long run.

That’s why Caceres-Santamaria challenges us to consider not only explicit alternatives —the choices and costs present at the time of decision-making—but also implicit alternatives , which are “unseen” opportunity costs.

“It's about thinking beyond the present and assessing alternative uses for the money—that is, not being shortsighted,” she writes.

What are some other examples of opportunity cost?

• A student spends three hours and $20 at the movies the night before an exam. The opportunity cost is time spent studying and that money to spend on something else.
• A farmer chooses to plant wheat; the opportunity cost is planting a different crop, or an alternate use of the resources (land and farm equipment). 
• A commuter takes the train to work instead of driving. It takes 70 minutes on the train, while driving takes 40 minutes. The opportunity cost is an hour spent elsewhere each day.

Is Opportunity Cost a Big Deal?

We might not consider lost studying time or $7 spent on a smoothie costly decisions, but what about bigger choices—like the decision to stretch and buy a more expensive home versus a starter home, or to spend $1,500 more on an upgraded trim package for your next car?

Caceres-Santamaria describes how opportunity costs are neglected even more when making higher priced purchases. Using the car-buying example, a consumer might default to thinking of the relative value of the $1,500 upgrade to the base price of the car, say, $18,500.

Rather than comparing the fancier configuration to the vehicle itself, it might be more helpful to ask what else that $1,500 could buy outright.

Why the Rush?

“Most of our decisionmaking that involves money is based on immediate or sooner-than-later consumption,” Caceres-Santamaria notes. “The excitement of consuming today is valued significantly more than the thought of consuming in the future.”

It’s human nature: We grow impatient, tugged by the immediacy of a promised benefit versus a payoff that’s possibly years down the road.

If seeing is believing, it’s worth looking at the future value of money —a concept many of us have read about in retirement plan literature or heard from financial advisors.

The Future Value of Money

Example 1: the one-time windfall.

Let’s say you got a surprise $4,000 windfall and want to use it for a getaway trip. Why not? It’s found money, so there’s no loss to you—unless you think about the opportunity cost.

If you nixed the trip and plunked your money into an income-producing product that earned an average annual interest rate of 3%, compounded monthly, you could find yourself with a cool $5,397 in 10 years.

Notes: Chart is for illustrative purposes only. Created with Compound Interest Calculator on Investor.gov

Wait another five years, and your funds could grow to $6,270 . (Neither example factors in the effects of inflation and taxes owed.)

That’s the added benefit in money terms. You’ll also want to consider the experiences that an extra $1,400 or more—the future earnings on your $4,000—could make possible.

Example 2: Small, regular savings over time

That’s an example of investing a single lump sum over time. What about the opportunity cost associated with daily purchases, such as the $4.49 caffè mocha you pick up three times a week? How much money could you find yourself with if investing that $54 each month rather than spending it?

If you dropped the coffee (careful!), invested $54 per month and earned the same 3%, compounded monthly, you’d have $7,619 to dunk your doughnut into in 10 years.

Too long to forego that regular mocha? Cutting the time frame in half to five years would still give you $3,554 in savings. (Again, these sums don’t include the impact of inflation and taxes.)

These examples are striking, especially when considering that a $4.49 caffè mocha habit over time can dwarf the seemingly larger decision to splurge on a $4,000 getaway trip.

Want to test some of your own opportunity cost what-ifs? Caceres-Santamaria encourages consumers to avoid “autopilot” mode when it comes to financial decisions. Start small—even with a pack of gum—and brainstorm as many alternative uses for your money as you can. 

Additional Resources

• Opportunity Cost - Online Course for Consumers
• There is No Such Thing as a Free Lunch
• How Does Compound Interest Work?
• Opportunity Cost - Economic Lowdown Podcast Series

Doreen Fagan works in External Engagement and Corporate Communications at the St. Louis Fed.

Related Topics

This blog explains everyday economics, consumer topics and the Fed. It also spotlights the people and programs that make the St. Louis Fed central to America’s economy. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

Media questions

All other blog-related questions

Home News & Diary School Blog

Homework: The Problem with Opportunity Cost

09 Dec 2021

Uncategorised

This week’s blog post is based on Chapter Four of Jared Cooney Horvath and David Bott’s book entitled  10 Things Schools Get Wrong: And How We Can Get Them Right . This chapter forms part of our blog post series which is based on the Teaching and Learning Reading Group, based here at Eton.

This chapter begins by emphasising the sheer number of hours students spend doing ‘homework’, citing that, in Australia alone, students collectively complete approximately 350 million hours of homework per year. [1] Therefore, homework comes at a significant opportunity cost. When students are spending time doing homework, they are not spending time doing things such as socialising, reading, playing football etc.

With such an investment of time and energy, it seems reasonable to assume that there is a clear evidence base for setting homework. However, alas, this is not always the case. Among academic and educational communities alike, research exploring the value of homework is highly polarised and ranges from those who call to increase the amount of work set, to those who plea for it to be abandoned altogether. [2]

Assumptions

Nevertheless, the significant majority of schools set homework and Horvath and Bott argue that this is based on a number of key assumptions:

• Assumption 1: Homework is an essential part of school.

Dr Cathy Vatterott (2009), a US educationalist, suggests that ‘Homework is a long-standing tradition that, until recently, has seldom been questioned. The concept of homework has been so engrained in US culture that the word homework is part of the common vernacular’. [3]

The same can be said for the UK education system, so much so that even employers set homework for new or prospective employees, coaches set work for athletes and therapists set work for their patients in between appointments.

Horvath and Bott claim that this compulsion to set homework is to do with its historical association with ‘rigour’ and therefore, an assumption develops that ‘rigorous’ teachers set more homework, whilst ‘lazy’ teachers set less. [4]

• Assumption 2: Homework helps students develop self-regulation skills.

This assumption rests on the idea that ongoing homework leads students to develop study skills and time management skills, and to become better independent learners. However, whilst this sounds like a legitimate assumption, there is a distinct lack of research to support or refute this notion.

Since 1986, there have been relatively few published papers on the impact of homework on self-efficacy. Only one showed significant improvement to a student’s ability to self-regulate; however, the homework tasks for the experiment were assigned explicitly to improve self-efficacy (H. Stoeger & A. Ziegler 2008). [5] Ergo self-efficacy was not the by-product of completing the homework, it was the homework.

• Assumption 3: Students must accept obedience in the real world.

As adults, we must regularly complete mundane tasks and so homework mimics this. The problem with this assumption, Horvath and Bott argue, is that there is a clear distinction between failing to complete tasks in the adult world, for example, not renewing our car tax on time and receiving a fine, and the consequences for students when they fail to complete theirs.

• Assumption 4: Homework boosts learning.

Again, research into this area provides us with a broad spectrum of potential viewpoints on the impact of homework on learning. Whilst there is more extensive research on this, studies are diverse and explore the impact of homework on a variety of age ranges, subjects and contexts. That said, there is a general consensus that homework has a broadly positive effect on learning. [6] Where they differ, is in terms of how much is set, the type of activity and how it is assessed.

From this research, Horvath and Bott claim that one of the most relevant findings from the research is that the correlation between duration and outcome is not linear: more homework does not necessarily mean more learning. [7] In fact, after a certain time point, more homework can impair learning. However, the majority of schools exceed these homework limits which needlessly pushes students and potentially harms their learning. This practice also reduces the time students have to undertake other personally meaningful activities, which may support wellbeing and other forms of social, emotional and personal development.

What can you do as a classroom teacher?

Although homework policies are largely dictated by a school’s senior management team, there are some things that a classroom teacher can implement themselves.

• Try to set homework activities which cultivate a love of learning. Psychological research has focused on identifying predictors of academic performance, with intelligence and effort emerging as core determinants. However, intellectual curiosity can expand on these predictors. (von Stumm et al. 2011). Encouraging students to feeling curious about particular aspects of their subject can boost their memory even when it comes to information they may not find so cognitively stimulating.
• Set activities which requires collaboration between students and their parents, siblings or classmates. Collaborative homework activities can help to improve students’ social and team-working skills. It can also help to improve students’ motivation to complete the homework activity because of the potential for them to foster personal relationships. [8]
• Set short activities for homework which have a clear and demonstrable learning purpose. The benefits of these activities should outweigh those which might be gleaned from other activities and should not push students beyond their learning limits.

[1] Australian Bureau of Statistics qtd. in J. Horvath and D. Bott, 10 Things Schools Get Wrong: And How We Can Get Them Right , (Woodridge: John Catt, 2020), p.51.

[2] B. P. Gill & S. L. Schlossman, ‘Villain or savior? The American discourse on homework’, 1850-2003, (2004), Theory into practice, Vol. 43, pp.174-181.

[3] C. Vatterott, Rethinking Homework: Best Practices that Support Diverse Needs, (Alexandria: ASCD Press, 2009), p.1.

[4] C. N. Davidson, Quantity is not Rigour , (2020), Inside Higher Ed, Available: <https://www.insidehighered.com/advice/2020/05/13/academics-should-rethink-way[4]they-assign-homework-opinion> Accessed: 9 December 2021. B. R. Blackburn , Rigor is Not a Four-Letter Word, (Rutland: Routledge Press, 2018).

[5] H. Stoeger & A. Ziegler, ‘Evaluation of a classroom based training to improve self-regulation in time management tasks during homework activities with fourth graders’, (2008), Metacognition and Learning , Vol. 3, pp.207-230.

[6] H. Cooper, ‘Synthesis of research on homework’, (1989), Educational leadership, Vol. 47, pp. 85-91. H. Cooper, J. C. Robinson & E. A. Patall, ‘Does homework improve academic achievement? A synthesis of research, 1987–2003’, (2006), Review of educational research , Vol. 76, pp.1-62. J. Hattie, ‘Visible learning: A synthesis of over 800 meta‐analyses relating to achievement’, (Rutland: Routledge, 2009), p.234.

[7] H. Cooper & J. C. Valentine, ‘Using research to answer practical questions about homework’, (2001), Educational psychologist , Vol. 36, pp.143-153.

S. Dettmers, U. Trautwein & O. Lüdtke, ‘The relationship between homework time and achievement is not universal: Evidence from multilevel analyses in 40 countries’, (2009), School Effectiveness and school improvement, Vol. 20, pp.375-405.

R. Fernández-Alonso, J. Suárez-Álvarez, & J. Muñiz, ‘Adolescents’ homework performance in mathematics and science: personal factors and teaching practices’ , (2015), Journal of Educational Psychology, Vol. 107, pp.1075.

C. Blazer, ‘Homework. Literature Review. Research Services’, (2009), Miami-Dade County Public Schools , Available: < https://eric.ed.gov/?id=ED536245 > Accessed: 09 December 2021.

J. Daw, ‘Parental income and the fruits of labor: Variability in homework efficacy in secondary school’, (2012), Research in social stratification and mobility, Vol. 30, pp.246-264.

U. Trautwein, O. Köller, B. Schmitz & J. Baumert, ‘Do homework assignments enhance achievement? A multilevel analysis in 7th-grade mathematics’, (2002), Contemporary Educational Psychology, Vol. 27, pp. 26-50.

[8] B. K. Jakubiak & B. C. Feeney, ‘Daily goal progress is facilitated by spousal support and promotes psychological, physical, and relational well-being throughout adulthood’ (2016), Journal of Personality and Social Psychology, Vol. 111, p.317.

The Teaching and Learning Summit

About the Centre

Our Research

From a high school essay to university term paper or even a PHD thesis

55 Coast Guard Academy cadets disciplined over homework cheating accusations

NEW LONDON, Conn. — Fifty-five U.S. Coast Guard Academy cadets have been disciplined for sharing homework answers in violation of academy policy, Coast Guard officials announced.

After a series of disciplinary hearings, six of the cadets failed the course and 48 got lowered grades, officials said Wednesday.

The cadets were accused of cheating by sharing answers for two separate homework assignments electronically.

“The U.S. Coast Guard Academy is committed to upholding the highest standards of integrity, honor, and accountability,” said Capt. Edward Hernaez, commandant of the academy. “Misconduct like this undermines trust and those found to have violated our principles were held accountable for their actions.”

The cadets will be provided the opportunity to appeal the disciplinary actions, officials said.