No Free Lunch

No Free Lunch

The idea of the "Free Lunch" was originated in the 19th century in America where the poor and needy were given free food. It was actually true, because no money was actually exchanged between the customer and the food establishment. The "Free Lunches" were also distributed during the Great Depression as a necessity for the people to survive. As America began to move forward past the hard times, many businesses began to rebuild their customer clientele and obviously were trying to return to profitability. The business owners were trying different advertising schemes to attract customers. The idea of using the "Free Lunch" advertisement returned, because customers still believed that they could still get something for nothing, but this was no longer the case. For example, dinking establishments---commonly called "bars"---would advertise "Free Chicken Sandwiches Today at 11:00 AM" and sometimes snacks with high salt content would be included as well. Naturally, customers would probably order several drinks as well. The liquid refreshments were not included with the free food and sometimes the owner would even raise the price. The profits from the sales of the drinks would actually pay for the free food and snacks. So, the phrase "There ain't no such thing as a free lunch" (TANSTAAFL) was born.

If we look at this phrase from an economic perspective it is really about a business trying to make a choice about what to produce and how much money, time, resources and effort should be used to build and sale a product. The most important part is the availability of resources, because there is not an unlimited supply and there is always a cost tied to it. It is known as scarcity. In the above example the owner had to make a choice between selling the sandwiches or giving them away. The total cost would have to calculate-for both choices-by the business owner's accountant and the owner would make a choice. The difference between the total cost of the two choices is the opportunity cost and it is the choice not chosen. In this case, the owner chose to give away his sandwiches with a total cost of $1000 and to sell them would be a total cost of $500. The opportunity cost is $500.

All businesses and individuals always use the opportunity cost to make a choice and it is always based on scarcity, time and money. For example, I am currently living in Saudi Arabia and I wish to take a course at UWF in the USA. The choices are to take it in residence or take the course on-line. If I choose to take it in residence I would use a staggering amount of resources and time going to and from Fl. on a weekly basis with a total cost of $40,000. The total cost for the on-line is $2000. The opportunity cost is $38,000.

The opportunity cost is businesses and individuals trying to make the right choice to get the most out