As you probably know this popular proverb means that you can't expect to get something unless you give something.
The proverb has its origin in American saloons in the 18th centrury when a free lunch was offered at bars expecting people to buy drinks. The lunch was a hook to attract starving men who would turn thirsty while eating, and they would need to gulp down a beverage.
In a larger sense this proverb refers to the idea that there's always a hidden cost to any decision you make. Let me explain it.
If you get a free benefit, somebody else provides the money for it, and if no individual is paying for it, a social cost is surely associated. For example, if a government rises his social free benefits, the social cost is that everybody becomes poorer or future generations won't have the same opportunity as you today.
Whenever you make a choice, you give up others said Greg Mankiw. For example if a friend of yours invite you to go to the cinema but you want to go to the disco, the final decision leaves the other option out. You'll have to wait for a new opportunity to convince your friend to dance or you can go by yourself another day. That's your cost associated with a shared outing.
If you split up with your husband or boy friend, you'll have to acccept the consequences of being single again, living alone and starting a new cycle of your life on your own. That effort to balance your new life is the price you pay.
If you dream of travelling to another culture, you have several opportunities. You can get your hard-earned money and pay for everthing. Great! This means you have previously planned your trip, put that amount of money aside. You have given your time and work to pay for what you want. This also means you won't be able to use that money for another opportunity.
When you apply for a scholarship, though apparently free, somebody is paying for it and you will have to pay for it someway. You have to devote time and effort to comply with regulations and compete with other candidates. You have to wait till the results are published and if you are not the winner, will have to look for another opportunity somewhere else or wait till the scholarship application opens again. That's your price for a free scholarship.
Next time you complain because a scholarship application is not easy enough, doesn't include air tickets or doesn't provide enough money, remember that somebody is paying for it and there's no such thing as a free lunch.