As human beings, what do we want and need? We certainly all need food, water, and shelter. And our wants may range from wealth to adventure to entertainment. These wants and needs are without bounds, but even though we have endless wants and needs, everything runs out. Food gets eaten. Money gets spent. And the Netflix show you’re currently binging has a final season. The things that fulfill our wants and needs are finite in nature. As we learned in the previous tutorial, this idea is called scarcity, and it drives everything in economics. We make personal choices, business choices, and collective choices differently, but we all do so based on scarcity. We can’t do everything or have everything, so we must weigh our options and make the best choice for ourselves that we can, based on our situation. All choices involve trade-offs. A trade-off is the act of giving up one benefit in order to gain another potentially greater benefit. For example, you are benefiting from watching this tutorial right now, but you chose to watch it because the perceived benefit of watching this tutorial outweighs other things that also could benefit you. Right now, you could instead be playing video games, or fishing, or rollerblading, or watching Netflix, or building birdhouses. All of those things could benefit you. But watching this tutorial benefits you more at this moment. When a restaurant makes a choice to pay its servers higher wages, it may have to be at the cost of spending money on advertising, or buying new appliances, or even paying its custodians higher wages. When a government makes the choice to spend more money on combat drones and bombs, it may have to be at the cost of spending more money on education, healthcare, or fixing roads. Whenever we make a choice, there is always an opportunity cost. Opportunity cost is the next best thing we give up by making that choice. It’s essentially the most desirable alternate choice, something which is useful to identify when making decisions because it reminds us to compare the value associated with various options.