Opportunity Cost

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 CostHistory, Opportunity Costs in Consumption, Opportunity Costs in Production, Non-monetary Opportunity Costs, Evaluation, Criticism

Other articles related to "cost, opportunity cost, opportunity costs, opportunity, costs":

Economic Cost
... The economic cost of a decision depends on both the cost of the alternative chosen and the benefit that the best alternative would have provided if chosen ... Economic cost differs from accounting cost because it includes opportunity cost ... As an example, consider the economic cost of attending college ...
Opportunity Cost - Criticism
... Opportunity cost has been seen as the foundation of the marginal theory of value as well as the theory of time and money ... In these circumstances, when one investment is assumed to be as good as any, opportunity cost is a less useful concept ...
Cost Of Conflict - Comprehensive Cost of Conflict Reports - Strategic Foresight Group's Cost of Conflict Reports - Opportunity Cost
... The most unique feature in these reports is the opportunity cost of conflict – that is the economic benefits that could have been accrued had there not been conflicts in these ... invasion of Iraq have lost a $12 trillion dollars (in 2006 dollar value) in opportunity costs from 1991 to 2010 ...
Modern Economics - Microeconomics - Production, Cost, and Efficiency
... Opportunity cost refers to the economic cost of production the value of the next best opportunity foregone ... The opportunity cost of an activity is an element in ensuring that scarce resources are used efficiently, such that the cost is weighed against the ... Opportunity costs are not restricted to monetary or financial costs but could be measured by the real cost of output forgone, leisure, or anything else that provides the alternative benefit (utility) ...
Production–possibility Frontier - Indicators - Opportunity Cost
... The sacrifice in the production of the second good is called the opportunity cost (because increasing production of the first good entails losing the opportunity to produce some amount ... Opportunity cost is measured in the number of units of the second good forgone for one or more units of the first good ... In the context of a PPF, opportunity cost is directly related to the shape of the curve (see below) ...

Famous quotes containing the words cost and/or opportunity:

    The one regret I have about my own abortions is that they cost money that might otherwise have been spent on something more pleasurable, like taking the kids to movies and theme parks.
    Barbara Ehrenreich (b. 1941)

    I am firmly opposed to the government entering into any business the major purpose of which is competition with our citizens ... for the Federal Government deliberately to go out to build up and expand ... a power and manufacturing business is to break down the initiative and enterprise of the American people; it is the destruction of equality of opportunity amongst our people, it is the negation of the ideals upon which our civilization has been based.
    Herbert Hoover (1874–1964)