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:
“If, at any time, it comes into my head, that a present is due from me to somebody, I am puzzled what to give, until the opportunity is gone.”
—Ralph Waldo Emerson (1803–1882)
“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)