opportunity cost

/ˌɑpərˈtunəti kɑst/

Other forms: opportunity costs

In economics, opportunity costs are the potential benefits you lose out on when you choose one option over another. An opportunity cost of ordering a strawberry milkshake is how delicious the chocolate one might have been.

Think of opportunity costs as potential missed opportunities. For economists, it's important to weigh these possible costs when making a financial decision, like whether to invest money or spend it on your business. The opportunity costs of investing might include making do with old equipment or being unable to hire new employees. On the other hand, spending on those things has an opportunity cost of potential stock market profits. Whenever you make a choice, there's an opportunity cost!

Definitions of opportunity cost

1. noun

   cost in terms of foregoing alternatives
   types:

   capital cost, cost of capital

   the opportunity cost of the funds employed as the result of an investment decision; the rate of return that a business could earn if it chose another investment with equivalent risk

   carrying charge, carrying cost

   the opportunity cost of unproductive assets; the expense incurred by ownership

   type of:

   cost

   the total spent for goods or services including money and time and labor