Explain whether decisions in microeconomics involve an opportunity cost.

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Explain whether decisions in microeconomics involve an opportunity cost.

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Every day everyone makes a myriad of decisions, choosing between two or ten or even hundreds of different possibilities. Action tends to be the best indicator of preference, of what people actually want, but in doing so people deny themselves all other options. This is the essence of scarcity: everyone can't have everything all at once. With every expressed preference there exists a next-best option: something you would have done if the first option wasn't available. This is called the opportunity cost. Because you do one thing, you've lost the opportunity to do something else. Opportunity costs can be thought of as a sort of regret, pain people bear as they imagine what they could be enjoying even if they are enjoying what they are doing right now more. Another way to think about opportunity costs is money value; profit you would have made if you did something else, such as a business venture.

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