Standards for Shopping for a Credit Card

Standard: 2

Name: Decision Making

People usually respond predictably to positive and negative incentives. Effective decision-making requires comparing the additional costs of alternatives with the additional benefits.

• K-5: In elementary school, students learn about the benefits and costs of making choices. They learn how positive and negative incentives influence their choices and behaviors, and how different people can make different choices given the same circumstances.
• 6-8: In middle school, the presentation of decision-making is refined by adding the ideas of marginal cost and marginal benefit. Students learn that decisions are made by comparing the marginal cost and the marginal benefit of doing something. Finally, they learn that monetary and non- monetary incentives exist and that decisions may have long- term consequences.
• 9-12: In high school, the scope of decision-making is expanded to include the various roles that individuals play in the economy as well as other decision-makers such as firms and governments. Caveats to decision-making such as unintended consequences, the costs and benefits of an allocation system, and sunk costs are covered. Finally, basic behavioral economics findings are introduced to illustrate examples where individuals may not make the best decisions.Benchmark Students will know that: Students will use this knowledge to: 2.E.1 Because of scarcity, something is given up whenever a choice is made.From a list of three toys, rank order their preferences, state their first choice, and identify the second toy as what is given up. 2.E.2 A cost is what you give up when you decide to do something. A benefit is the gain a person receives when they decide to do something.List the costs (what you give up) and benefits (what you gain) of buying a pet. 2.E.3 The opportunity cost of an activity is the value of the best alternative that would have been chosen instead. It includes what would have been done with the money spent, the time, and other resources used in undertaking the activity.Describe a situation that requires a choice among several alternatives. Decide which they would choose and then identify the opportunity cost of that decision. 2.E.4 The evaluation of choices and opportunity costs is subjective; such evaluations vary depending on individual preferences, cultural backgrounds, and societal norms.Compare solutions to a common problem, such as where to go on a class trip, and explain why solutions and opportunity costs differ among students. 2.E.5 Many choices involve doing a little more or a little less of something; few choices are “all-or-nothing” decisions.Decide how the school should spend $4,800 to buy new playground equipment. Their class voted and would like to buy four swing sets ($1,200 each), three slides ($1,200 each), and three jungle gyms ($600 each). Explain what they must give up to get more of some and less of other equipment.E: ELEMENTARY STUDENTS National Content Standards in K–12 Economics | 12 Standard 2: Decision-Making

Name: Investing

Standard: 4

• Students will understand that: People can choose to invest some of their money in financial assets to achieve long-term financial goals, such as buying a house, funding future education, or securing retirement income. Investors receive a return on their investment in the form of income and/or growth in value of their investment over time. People can more easily achieve their financial goals by investing steadily over many years, reinvesting dividends, and capital gains to compound their returns. Investors have many choices of investments that differ in expected rates of return and risk. Riskier investments tend to earn higher long-run rates of return than lower-risk investments. Investors select investments that are consistent with their risk tolerance, and they diversify across a number of different investment choices to reduce investment risk.