What is opportunity cost?

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.

How to explain opportunity cost to kids?

Keep reading for tips on how to explain opportunity cost to kids, why it’s important for their financial literacy, and activities to teach them how it works. When you’re presented with a choice, the opportunity cost is the value of what you don’t pick. In other words, it’s the value of what you give up.

What is opportunity cost in microeconomics?

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 effective it means if you chose one activity (for example, an investment) you are giving up the opportunity to do a different option.