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In economics there is a saying:"There's no such thing as a free lunch". It means that nothing is really "free" because we use resources that could have been used for something else. We live in a world of scarce resources and unlimited wants. The concept of scarcity is essential to the field of economics. With scarcity come choices. Economics deals with how people and society make choices under conditions of scarcity, as well as the individual and social consequences of these choices. Economics is concerned with the analysis of this decision-making process. To make efficient decisions - decisions that provide the greatest possible earnings from the resources available - people and society must consider the benefits and costs of using their resources to get more of some things, and less of others. The reality is that we cannot have everything that we want. We must choose which of our desires we will meet and which we will leave unsatisfied. So, faced with scarcity, individuals, government and society must make choices.

Choosing any scarce thing sets the limit on other options. To the economist such foregone options are opportunity cost. Suppose you drive a car. Buying an extra gallon of gasoline may prevent you from buying an extra piece of pizza, but purchasing the pizza instead of the gas may force you to drive less and walk more. Economists view opportunity cost as the value of the next best option forgone when a choice is made.

You make different choices every day as well. Choices involve a trade-off of the value of one opportunity against the value of its best alternative. Are there any additional benefits and costs of studying economics rather than listening to music or meeting friends, or sleeping? Is watching TV the best use of your time? Is working at a fast-food restaurant better than the best alternative job or some other use of your time? Will you graduate the university? (Potential benefits include higher lifetime income, meeting interesting people, and the joy of learning; costs include expenditures for tuition, books and different supplies, the hard work in classes, and the income you could be making right now.) Where will you live and work? Will you marry? (Marriage involves both financial and psychological costs and benefits.) Will you have children? If so, how many? How will you spend your limited income? Decisions about these and other economic choices will create the course of your life.

For most people opportunity cost is measured by the money paid to produce or acquire goods, but opportunity cost is ultimately personal and involve far more than money alone.

Have you ever estimated the cost of your education? Consider the value of your time. Instead of studying and attending class, you could get a full-time or part-time job. You may be giving up better food and clothes, a nice car, and a comfortable apartment. The values of all forgone alternatives are the true costs of education. But suppose you quit school. The costs of your nice car, apartment, food, and clothing would include the forgone enjoyment of learning and campus life, and the higher future income and consumption your university degree might have made possible.

Date: 2015-12-11; view: 824