Glossary – Opportunity Cost

Reviewed by Raphael Zeder | Updated Oct 8, 2017


The value of the next best alternative that has been given up in order to get something. The foregone benefits one could have received by taking an alternative decision.


Suppose you have 20$ in your piggy bank. You can either spend that money on a new t-shirt or buy your favorite band’s new album. If you chose to buy a new t-shirt, your opportunity cost would be the value you forgo by not being able to buy and listen to the new album.


Opportunity costs are one of the most basic and omnipresent principles in economics. Every time we take a decision, we face trade-offs and thus opportunity costs. It is important to be aware of the fact that choosing something also always means not choosing something else.

Leave a Reply

Your email address will not be published. Required fields are marked *

I agree that my data may be stored and used as stated in the privacy policy.