Your Decision-Making Toolkit: Part 1
Unit 1 · Lesson 1.3 · Last updated September 18, 2026
A 45-minute lesson introducing the cost-benefit and opportunity cost principles of economic thinking, with no prior personal finance background required.
Overview
In this lesson, students are introduced to the four principles of economic thinking that serve as a decision-making framework: the cost-benefit, opportunity cost, marginal, and interdependence principles. Students will learn about the cost-benefit and the opportunity cost principles and have a chance to practice applying these in different contexts. Explicit connections are made to the primary activity in Lesson 1.2. Consider changing the examples if students have not participated in that lesson.
Learning Objectives
- Describe the cost-benefit principle, including incentives, and explain the role it plays in decision making.
- Describe the opportunity cost principle and explain the role it plays in decision making.
Materials
- Instruction Slides (display during class period)
- Unit 1 Overview (1 copy per student). Consider printing on colored paper to help students locate it throughout Unit 1.
- Student Handout (1 copy per student)
- Practice and Demonstration (1 copy per student)
- KEY Practice (class set, 6 copies)
- Demonstration Suggested Student Responses (1 copy for educator use)
- Optional: Unit 1 Key Terms (digital access or 1 copy per student)
Lesson Sequence
Slides 2–4
- Display Slide 2. Direct students to discuss the prompt on the slide with a peer for approximately 2 minutes.
- Advance to Slide 3. Use the text on the slide to emphasize the prevalence of personal finance decision making over a lifetime. Consider highlighting select choices based on student interest. Additional educator tips, details, and suggested answers are in the notes section throughout the Instruction Slides.
- Proceed to Slide 4. Explain the learning objectives for students.
Slides 5–25
- Progress through Slides 5–6. Use the text on Slide 6 to identify the four principles of economic thinking that economists use to frame choices across all types of decision making, including personal finance. Remind students that combining these principles with individual priorities and preferences gives them a personalized decision-making framework.
- Display Slide 7. Use the equation on the slide to reinforce that mastering the principles of economic thinking alongside personal finance knowledge does not hand students one correct answer, but instead prepares them to make effective financial decisions for themselves, based on what matters most to them.
- Proceed to Slide 8. Distribute 1 copy of the Unit 1 Overview to each student. Tell students it serves as a roadmap for the unit. Direct students to preview the learning objectives they should master by the end of the unit and the summative assessment that will gauge their proficiency.
- Click to reveal the remaining text on Slide 8 and instruct students to put the Unit 1 Overview in their notebook. They will return to it at the end of the lesson.
- Advance to Slide 9. Distribute 1 copy of the Student Handout. Tell students to add notes, examples, and drawings to their handout throughout the lesson. Key Terms: the optional Unit 1 Key Terms can be used as scaffolding or for metacognition. As scaffolding, distribute copies now so students can take notes on the terms list or use it to support their note-taking throughout Lessons 1.3 and 1.4. As metacognition, distribute after Lesson 1.4 and encourage students to review the definitions, decide whether their notes left out anything essential, and add details as needed.
- Display Slide 10. Remind students of the role scarcity plays in decision making.
- Progress to Slide 11. Highlight that the principles of economic thinking are a framework for making decisions. Tell students they will now learn about the first two principles, the cost-benefit principle and the opportunity cost principle, and that they will learn the remaining two in Lesson 1.4.
- Advance through Slides 12–14. Use Slides 13–14 to explain the cost-benefit principle. You may want to alert students to the anchor question on Slide 14, "Benefits beat costs?", as a helpful tool for applying the principle.
- Display Slide 15. Define utility and clarify that the utility derived from a decision can vary depending on individual preferences.
- Proceed to Slide 16. Define incentives and click to explain that incentives are another way to think about costs and benefits.
- Display Slide 17. Have students read the review question on the slide and discuss it with a peer. Click to reveal the additional information.
- Advance to Slide 18. Direct students to discuss the question on the slide with a peer and apply the cost-benefit principle. Click to reveal the remaining text and poll the class to determine whether a change in incentives resulted in any behavior changes.
- Display Slide 19. Describe the role preferences play in maximizing benefits.
- Proceed to Slide 20. Explain that changing incentives can, but does not always, lead to a change in people's behavior.
- Progress through Slides 21–22 to transition to the opportunity cost principle. Define opportunity cost.
- Advance to Slide 23 and explain the opportunity cost principle. You may want to alert students to the anchor question on Slide 23, "Or what?", as a helpful tool for applying the principle.
- Display Slide 24. Tell students to follow the instructions on the slide. Click to reveal the questions and instruct students to answer them with a peer.
- Proceed to Slide 25. Direct students to discuss the question with a peer and then debrief as a class.
Slides 26–27
- Advance through Slides 26–27. Place students in pairs, or allow students to select their own partners.
- Distribute 1 copy of Practice and Demonstration to each student. Clarify the instructions on Slide 27 and tell students that as they make their choices they are using the principles of economic thinking. Pro Tip: students get a copy of all practice options and demonstration prompts so the remainder is ready-made retrieval practice. If you assign it later in the unit as out-of-class practice, students will need access to KEY Practice afterward for immediate feedback, and posting it to a learning management system is a low-cost way to do that.
- Place copies of KEY Practice around the room in easy-to-access locations and alert students to their placement. Remind students that they must review KEY Practice to identify and correct mistakes before moving on to the demonstration prompt. KEY Practice is not an exhaustive analysis but identifies the main examples of the cost-benefit and opportunity cost principles. Tell students they may make slightly different connections, and that they should check with you to make sure additional responses are couched in sound economic reasoning.
- Allow pairs 13 minutes to complete Practice and Demonstration, using the instructions provided to guide them. Circulate while students work to answer questions and clarify as needed. Discuss as a class, making sure students understand that opportunity cost is only their second highest-valued alternative.
- Collect Practice and Demonstration and review student Demonstration responses for common misconceptions or gaps in understanding to address at the start of the following class. See the Demonstration Suggested Student Responses.
Slides 28–29
- Progress through Slides 28–29. Direct students to locate their copy of the Unit 1 Overview, read the Semester and Unit 1 Big Ideas and Essential Questions on their handout, then answer the question on the slide with a peer. It might be helpful to explain what Big Ideas and Essential Questions mean in this context.
- Instruct students to put the Unit 1 Overview and Student Handout in their course notebook, or another easily accessible location, since they will refer to them throughout the unit.
Aligned Standards
Voluntary National Content Standards in Economics
Standard 1 Scarcity and Allocation
Standard 2 Decision-Making
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