Costs of production. Opportunity costs. Tradeoffs.
Opportunities are chances to improve your situation. Opportunities may cost you something.
All production involves a cost. This cost is not counted simply in terms of money but also in terms of resources used. The various resources used in producing a good or services are the real costs of that product. In building a bridge, for example, the real costs of the bridge are the human, capital and natural resources in consumes.
Since resources are limited and human wants are unlimited, people and societies must make choices about what they want most. Each choice involves costs. The value of time, money, goods and services given up in making a choice is called opportunity cost.
To make choices that best satisfy human wants, people must be aware of all the tradeoffs.
One of the most important choices a society makes is between producing capital goods and producing consumer goods. If a nation increases its production of consumer goods, its people will better lives today. However, if a nation increases its production of capital goods, its people may live better in the future.
Society must decide what it wants and what it is willing to give to get it. When you analyze each side of a tradeoff, you can make better decisions.
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