Free US Law Dictionary

Opportunity Cost

Opportunity cost is the cost (sacrifice) incurred by choosing one option over an alternative one that may be equally desired. Thus, opportunity cost is the cost of pursuing one choice instead of another. Every action has an opportunity cost. For example, someone who invests $10,000 in a stock denies oneself the interest that one can earn by leaving the $10,000 dollars in a bank account instead. Opportunity cost is 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 cost is a key concept in economics because it implies the choice between desirable, yet mutually exclusive results. It has been described as expressing "the basic relationship between scarcity and choice."[1]