Opportunity cost

Opportunity Cost in the Fundamental Principles of Economics Opportunity cost is one of the central concepts of economics and is directly linked to the principle of scarcity and choice. It represents the value of the best alternative sacrificed when making a decision. Since resources are limited, every choice involves giving up another possibility. What is Opportunity Cost? Opportunity cost is the benefit that is lost by choosing one option over another. It can be measured in terms of money, time, resources or any other relevant value.
Opportunity Cost Applications In Government: If a government decides to invest more in infrastructure (roads and bridges), the opportunity cost may be fewer resources for health or education. In Business: A company that chooses to manufacture a luxury product instead of a popular product gives up the profit it could have made with the second option. Importance of Opportunity Cost It helps individuals, companies and governments make more strategic decisions. It allows them to evaluate the best way to use scarce resources. It influences the allocation of capital and investments.