Opportunity Cost

Definition

Opportunity cost refers to the value of the next best alternative that is forgone when making a choice. It represents the trade-off between different options.

Related terms

Scarcity: Scarcity refers to limited resources in relation to unlimited wants, which leads to choices and trade-offs.

Trade-off: A trade-off occurs when choosing one option means giving up another option.

Marginal Cost: Marginal cost is the additional cost incurred by producing or consuming one more unit of a good or service.