2. When People Choose One Thing They Give Up Something Else
Scarcity of economic resources forces people to make tradeoffs. That is, people must always consider how to spend their own limited incomes or time because resources are limited to satisfy their unlimited needs and wants. Tradeoffs or choosing a one thing means giving up something else. When we give up an item, we lose the benefits of its services to us or incur costs to obtain the benefits of the thing we decided to choose. Thus, making decisions requires comparing the costs and benefits of alternative courses of action. In economics, the term used to reflect whatever must be given up to obtain some item is called opportunity cost.