If each of us made a list right now of the top ten things we would like to have and our fairy godmother popped out of the air and gave us what we wanted most of us immediately would find that there are ten more things we'd like to have. Because resources are scarce and wants are unlimited, economics studies the best way to allocate resources so that none are wasted. Because scarcity is universal, people must make choices. The opportunity cost of something is what you need to give up in order to get it. For example, if you would prefer to be sleeping now instead of studying economics, the opportunity cost of studying is the sleep you could be enjoying.
Opportunity costs are a key element in the way economists look at the world.
Opportunity costs determine which activities people should specialize in. For example, think about a small law office with just one lawyer and one secretary. It is more efficient for the lawyer to specialize in practicing law, and let the secretary do the typing. It pays to specialize whenever opportunity costs are different. Two parties can specialize and then trade, which makes both parties better off.