Governments also make trade-offs when they decide to spend their money on military needs instead of domestic ones, and vice versa. In most trade-offs, one of the rejected alternatives is more desirable than the rest. The most desirable alternative somebody gives up as a result of a decision is the opportunity cost.

Why do decisions involve trade-offs?

Every decision involves trade-offs because every choice you want results in picking it over something else. ... Opportunity cost means choosing the better one of two ideas. There will always be an alternative; what could have happened instead.

Who has to make choices and trade-offs?

Your scarce resources force you to make a choice and a trade-off producing one product or another. Tradeoffs: Since resources are scarce for a drink manufacturer, it must make a tradeoff between producing bottles of water and bottles of soda. Like producers, consumers also have to make choices.