Opportunity Cost

Opportunity Cost refers to the value of the next best alternative that is forgone when making a decision. It represents the benefits you could have received by taking an alternative action instead of the chosen one.

Example 1: If you choose to spend $1,000 on a vacation, the opportunity cost is what you could have done with that Money instead, such as Investing it in the Stock market or saving for a car.

Example 2: A student deciding to spend time studying for an exam instead of going out with friends faces the opportunity cost of missing social interactions and leisure time.

Case: A farmer has a plot of land that can be used to grow either corn or wheat. If he chooses to plant corn, the opportunity cost is the profit he would have earned from planting wheat instead.