What are the trade offs involved in economic choices? What relationship do they have with opportunity costs?

Answer:
There are three phases to a decision that leads to a choice: a problem situation, calculating relative opportunity costs, and making a choice.

A Problem Situation
You have a problem when you want two things, but you realize that you can't have both at the same time. Think about a situation in which you have only $250 to spend. You have two goals. One—let's call it Plan A—is that you need to complete the work of a final course for your business diploma or degree. The second, which we will call Plan B, is that you also want to be fit and healthy. Currently you don't have a good pair of running shoes, and you want to make trail running part of your regular fitness program.
There is a Plan C—you can fail to make a choice. However, Plan C brings you no closer to either goal. You need to make a clear choice, but you face a difficult trade off. You must give up something valuable in order to get something even more valuable.

Calculating Relative Opportunity Costs
You decide to do an economic calculation to help make a choice. The college course you need will cost $225. A really good pair of running shoes that you like will cost you $180 plus taxes, for a total of $207. You recognize the trade off. You have to give one alternative up, but which one? You would like both, but you have limited resources. Think first of Plan B, the fitness goal. If you spend the money on the shoes, you trade away future economic opportunity and security. The opportunity cost if you choose Plan B, then, is the highest-valued alternative that you have to give up. You estimate that completion of the program will lead to an annual income, after graduation, of over $30,000.
Is there an opportunity cost to choosing Plan A? Yes. If you don't stay fit, you could get sick, and that could negatively affect your life and work. But into your calculation you factor the reality that there are many ways to stay fit. You could, for example, walk home from the college, or you could get out the old bicycle for evening rides, or you could join the college athletic facility.

Making a Choice
Making a rational choice will depend on your calculations of the two alternatives. Plan B has relatively higher opportunity costs than Plan A. If you choose B, you have to forego something that you highly value—your economic future. If you choose A, you have costs. Running in the forest would have been nice, but you have some fitness alternatives.
You make an economic—a rational—decision, and choose Plan A over Plan B. Recognizing the trade off, and making some relative opportunity cost calculations, makes for a better decision.