What does opportunity cost mean?

Definitions for opportunity cost
op·por·tu·nity cost

This dictionary definitions page includes all the possible meanings, example usage and translations of the word opportunity cost.

Princeton's WordNet

  1. opportunity costnoun

    cost in terms of foregoing alternatives

Wiktionary

  1. opportunity costnoun

    The cost of an opportunity forgone (and the loss of the benefits that could be received from that opportunity); the most valuable forgone alternative.

Wikipedia

  1. Opportunity cost

    In microeconomic theory, the opportunity cost of a particular activity is the value or benefit given up by engaging in that activity, relative to engaging in an alternative activity. More effectively it means if you chose one activity (for example, an investment) you are giving up the opportunity to do a different option. The optimal activity is the one that, net of its opportunity cost, provides the greater return compared to any other activities, net of their opportunity costs. For example, if you buy a car and use it exclusively to transport yourself, you cannot rent it out, whereas if you rent it out you cannot use it to transport yourself. If your cost of transporting yourself without the car is more than what you get for renting out the car, the optimal choice is to use the car yourself. In basic equation form, opportunity cost can be defined as: "Opportunity Cost = (returns on best Forgone Option) - (returns on Chosen Option)." The opportunity cost of mowing one’s own lawn for a doctor or a lawyer (who might otherwise make $100 an hour if they elected to work overtime during that time instead) would be higher than for a minimum-wage employee (who in the United States might earn $7.25 an hour), which would make the former more likely to hire someone else to mow their lawn for them. As a representation of the relationship between scarcity and choice, the objective of opportunity cost is to ensure efficient use of scarce resources. It incorporates all associated costs of a decision, both explicit and implicit. Opportunity cost also includes the utility or economic benefit an individual lost, if it is indeed more than the monetary payment or actions taken. As an example, to go for a walk may not have any financial costs imbedded in to it. Yet, the opportunity forgone is the time spent walking which could have been used instead for other purposes such as earning an income.Time spent chasing after an income might have health problems like in presenteeism where instead of taking a sick day one avoids it for a salary or to be seen as being active. A production possibility frontier shows the maximum combination of factors that can be produced. For example, if services were on the x-axis of a graph and there were to be an increase in services from 20 to 25, this would lead to an opportunity cost for the goods that are on the y axis, as they would drop from 21 to 16. This means that as a result of the increase in consumption of services, the opportunity cost would be those 5 goods that have decreased. Regardless of the time of occurrence of an activity, if scarcity was non-existent then all demands of a person are satiated. It is only through scarcity that choice becomes essential, since the use of scarce resources in one way prevents its use in another way, resulting in the need to make a selection and/or decision. These decisions are in turn exposed to multiple choice outcomes.Sacrifice is a given measurement in opportunity cost of which the decision maker forgoes the opportunity of the next best alternative. In other words, to disregard the equivalent utility of the best alternative choice to gain the utility of the best perceived option. If there are decisions to be made that require no sacrifice then these are cost free decisions with zero opportunity cost. Through the analysis of opportunity cost, a company can choose a path where the actual benefits are greater than the opportunity cost, so that limited resources can be optimally allocated to achieve maximum efficiency. When choosing an option among multiple alternatives, the opportunity cost is the gain from the alternative we forgo when making a decision. In simple terms, opportunity cost is our perceived benefit of not choosing the next best option when resources are limited. Opportunity costs are not limited to monetary or financial costs. The actual cost of lost time, lost production, or any other for-profit benefit shall also be considered an opportunity cost. Opportunity cost is a key concept in economics, described as the fundamental relationship between scarcity and choice.

ChatGPT

  1. opportunity cost

    Opportunity cost refers to the potential benefit or value that an individual, investor, or business misses out on when choosing one alternative over another. In other words, it is the cost of the next best alternative forgone. This concept highlights that for every decision made, there are potential trade-offs and sacrifices.

Wikidata

  1. Opportunity cost

    In microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. Assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit that would be had by taking the second best choice available. The New Oxford American Dictionary defines it as "the loss of potential gain from other alternatives when one alternative is chosen". 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.

Matched Categories

How to pronounce opportunity cost?

How to say opportunity cost in sign language?

Numerology

  1. Chaldean Numerology

    The numerical value of opportunity cost in Chaldean Numerology is: 7

  2. Pythagorean Numerology

    The numerical value of opportunity cost in Pythagorean Numerology is: 3

Examples of opportunity cost in a Sentence

  1. Esfandyar Batmanghelidj:

    At best, Russia can aim to demonstrate resilience to sanctions, but that just means staving a runaway economic collapse, this is why the real cost of sanctions is an opportunity cost of forgone growth.

  2. Michael Waltz:

    I'm worried about the macro aggressions, everything, when Fox News comes to training, is an opportunity cost. Every hour, every day you're spending training on this stuff, you're not training on all the other things we need that I would argue would be a higher priority to fight and win wars.


Translations for opportunity cost

From our Multilingual Translation Dictionary

Get even more translations for opportunity cost »

Translation

Find a translation for the opportunity cost definition in other languages:

Select another language:

  • - Select -
  • 简体中文 (Chinese - Simplified)
  • 繁體中文 (Chinese - Traditional)
  • Español (Spanish)
  • Esperanto (Esperanto)
  • 日本語 (Japanese)
  • Português (Portuguese)
  • Deutsch (German)
  • العربية (Arabic)
  • Français (French)
  • Русский (Russian)
  • ಕನ್ನಡ (Kannada)
  • 한국어 (Korean)
  • עברית (Hebrew)
  • Gaeilge (Irish)
  • Українська (Ukrainian)
  • اردو (Urdu)
  • Magyar (Hungarian)
  • मानक हिन्दी (Hindi)
  • Indonesia (Indonesian)
  • Italiano (Italian)
  • தமிழ் (Tamil)
  • Türkçe (Turkish)
  • తెలుగు (Telugu)
  • ภาษาไทย (Thai)
  • Tiếng Việt (Vietnamese)
  • Čeština (Czech)
  • Polski (Polish)
  • Bahasa Indonesia (Indonesian)
  • Românește (Romanian)
  • Nederlands (Dutch)
  • Ελληνικά (Greek)
  • Latinum (Latin)
  • Svenska (Swedish)
  • Dansk (Danish)
  • Suomi (Finnish)
  • فارسی (Persian)
  • ייִדיש (Yiddish)
  • հայերեն (Armenian)
  • Norsk (Norwegian)
  • English (English)

Word of the Day

Would you like us to send you a FREE new word definition delivered to your inbox daily?

Please enter your email address:


Citation

Use the citation below to add this definition to your bibliography:

Style:MLAChicagoAPA

"opportunity cost." Definitions.net. STANDS4 LLC, 2024. Web. 29 Mar. 2024. <https://www.definitions.net/definition/opportunity+cost>.

Discuss these opportunity cost definitions with the community:

0 Comments

    Are we missing a good definition for opportunity cost? Don't keep it to yourself...

    Image or illustration of

    opportunity cost

    Credit »

    Free, no signup required:

    Add to Chrome

    Get instant definitions for any word that hits you anywhere on the web!

    Free, no signup required:

    Add to Firefox

    Get instant definitions for any word that hits you anywhere on the web!

    Browse Definitions.net

    Quiz

    Are you a words master?

    »
    (of a flowering plant) having two cotyledons in the seed
    A bonzer
    B tenebrous
    C flabby
    D dicotyledonous

    Nearby & related entries:

    Alternative searches for opportunity cost: