Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative forgone (that is not chosen). It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices. The opportunity cost is also the "cost" (as a lost benefit) of the forgone products after making a choice. Opportunity cost is a key concept in economics, and has been described as expressing "the basic relationship between scarcity and choice". The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently. 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 opportunity costs.
Read more about Opportunity Cost: History, Opportunity Costs in Consumption, Opportunity Costs in Production, Non-monetary Opportunity Costs, Evaluation, Criticism
Famous quotes containing the words opportunity and/or cost:
“Science with its retorts would have put me to sleep; it was the opportunity to be ignorant that I improved. It suggested to me that there was something to be seen if one had eyes. It made a believer of me more than before. I believed that the woods were not tenantless, but choke-full of honest spirits as good as myself any day,—not an empty chamber, in which chemistry was left to work alone, but an inhabited house,—and for a few moments I enjoyed fellowship with them.”
—Henry David Thoreau (1817–1862)
“In the early days of the world, the Almighty said to the first of our race “In the sweat of thy face shalt thou eat bread”; and since then, if we except the light and the air of heaven, no good thing has been, or can be enjoyed by us, without having first cost labour.”
—Abraham Lincoln (1809–1865)