What Is Opportunity Cost?
Have you ever faced an opportunity or choice and said to yourself, "If I don't do this, I'll regret it"? In a situation where you are deciding amongst several options, there's always a benefit you miss out on that's associated with the choice(s) you don't take. This foregone benefit can be thought of as a cost to you related to making your decision and, in the field of Economics, it's referred to as an opportunity cost. The simple definition of opportunity cost is:
Opportunity Cost is the benefit foregone related to the alternative choice when a decision is made.
In other words, an opportunity cost is the regret you anticipate from not taking another option. For example, if you spend your time studying for an exam, the opportunity cost would be the time you could have spent having fun.
This concept acknowledges not just the explicit costs of a choice but also the implicit costs of what you forgo when you make that decision. Opportunity cost provides a framework for decision-making to find the most benefit, particularly for limited resources like time and money.