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:
“Our fathers and grandfathers who poured over the Midwest were self-reliant, rugged, God-fearing people of indomitable courage.... They asked only for freedom of opportunity and equal chance. In these conceptions lies the real basis of American democracy. They and their fathers give a genius to American institutions that distinguished our people from any other in the world.”
—Herbert Hoover (1874–1964)
“The cost of a thing is the amount of what I will call life which is required to be exchanged for it, immediately or in the long run.”
—Henry David Thoreau (1817–1862)