Opportunity cost
noun · Economics
Definition
The value of the next best alternative given up when a choice is made.
Explanation
It includes non-money costs such as time.
Example
Studying instead of working has an opportunity cost of the pay forgone.
Common confusion
It is the best forgone alternative, not all alternatives.
Related terms
- ScarcityThe condition that resources are limited while wants are unlimited.
- Trade-offA situation where gaining more of one thing means having less of another.
Study guides that use this term
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