Comparing benefits and costs of attending an event.
Summary
CollapseContext for Use
Overview
The point of this AE is to get students thinking about the key elements to consider when determining opportunity costs. It is purposely somewhat ambiguous to get students to explicitly state their assumptions as they rank who is more likely to purchase tickets to a a show (at a lower price) in person versus online, or even at all.
Expected Student Learning Outcomes
Understand how opportunity costs are related to the rational decision-making process.
Information Given to Students
Consider the following group of people:
-Joe, a full-time college student, who is maxed out on student loans to make ends meet. He has little to no discretionary income on a day to day basis.
-Marisa, a retired grandmother, who has very few expenses, but also a very limited income.
-Kadeem, a professional actor, who is currently on set for a film in which he's being paid $5 million. He is filming approximately 10 hours each day.
-Latisha, a neurosurgeon, who earns approximately $500 per hour, and works approximately 60 hours per week at the local hospital.
-Mark, a stay-at-home father who takes care of 3 small children all day everyday while his partner is working full-time.
A traveling show of the highly popular musical Hamilton comes to town, and each of them are extremely interested in seeing the show. Tickets are available for purchase online for $150, or can be purchased in person for a limited time on a first-come, first-served basis for $100. To purchase the tickets in person, they will need to travel to the ticket booth and plan to get there well in advance of when the tickets go on sale if they want good seats, perhaps even camping out overnight to get close enough to the front of the line to get a ticket. Given the information about each person, consider the following questions:
1. Who is likely to attend the show and who is likely to skip it even if they really want to go? Why?
2. Of the people going to the show, who is likely to purchase the tickets online and who is likely to buy the ticket in person? Why?
Finally, rank the members of this group in the order of who is most likely to purchase the tickets online to who is the least likely to purchase the tickets at all. Create a list indicating your rank to share with all other groups. Be prepared to explain your response and which factors are most important to consider when answering this question.
Teaching Notes and Tips
Prefatory remarks:
This AE is designed to get students thinking about opportunity costs. They should first consider the opportunity costs of attending the show at all, then consider the opportunity costs associated with trying to save money by purchasing tickets in person.
Debriefing notes, including discussion questions:
This question can have many correct answers. The instructor should get students to explain all the assumptions they are making because different assumptions will lead to different answers.
Closing remarks:
Students should show that they must consider things to answer this question. They will likely think about the opportunity cost of time for each person (to both see the show, and to save money on the tickets). They might also talk about differences in preferences and how that influences the marginal benefit of attending the show for each person, if they decide to put their answers in a marginal thinking framework. They might make assumptions about how far away the location is for each person to travel to get the cheaper tickets, or how likely it is that someone would be to purchase goods online. There is no clearly correct answer here without explicitly stating the assumptions made in their rankings, and students are likely to come up with different answers.