opportunity cost
Sign in to savewhen presented with multiple opportunities, the cost of making a certain choice in comparison to its alternatives
AI overview
Opportunity cost is the value of what you give up when you choose one option over another—for example, the money you could have earned if you'd chosen a different job instead. It matters because recognizing what you're sacrificing helps you make better decisions by comparing what you gain against what you lose.
AI-generated from the Wikipedia summary — may contain errors.
Article
In microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives. Assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit that would have been had if the second best available choice had been taken instead. The New Oxford American Dictionary defines it as "the loss of potential gain from other alternatives when one alternative is chosen". As a representation of the relationship between scarcity and choice, the objective of opportunity cost is to ensure efficient use of scarce resources. It incorporates all associated costs of a decision, both explicit and implicit. Thus, opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, pleasure, or any other benefit that provides utility should also be considered an opportunity cost.
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