Since the economic resources of every society are limited or scarce, all society face the problems of using or administering scarce resources in order to attain the maximum satisfaction of society's unlimited wants. Therefore choices must be made about what to produce, for whom to produce, and how to ration the product over time. This economizing problem can be revealed easily by production possibilities curve.
A production possibilities curve is "a graphical representation of various combinations of maximum output that can be produced from the available resources". If a society produce only two products with full employment and limited resource, each point on this curve represents some maximum output of any two products. The society must choose which product mix it desires: more product X means less product Y, and vice versa. Here, the amount of other products that must be given up to obtain some amount of any given product is the opportunity cost.
The choice in economics applies to our daily life decisions such as from buying a coffee or green tea to purchasing or renting a house. Considering limited budget, time, or conveniences, we try to do our best in order to obtain maximum output, in order words, the maximum satisfaction. When I started to work in current office in downtown, I have to make a choice between public transit or using my own vehicle. In considering the highly increased cost of parking in downtown and the time to commute to my office, I had to decide to use public transit; in this case, my opportunity cost might be "convenience" especially in winter season.
Once again, before returning to school, considering scarcity such as limited budget and time, I must compare my opportunity costs with what I can obtain in the future, and concluded that what I give up is worthwhile in order to achieve my long-term goals.
