Opportunity cost is the next best alternative sacrificed.

Opportunity cost refers to the potential benefit that an individual or a business gives up when they choose one option over another. It is the value of the next best alternative that is forgone or sacrificed in order to make a particular choice. The concept of opportunity cost is based on the idea that resources are scarce and have alternative uses.

Explanation:

When making a decision, individuals and businesses have to consider the trade-offs involved. They need to weigh the benefits and costs of each option and choose the one that provides the highest value or utility. However, by choosing one option, they are giving up the benefits that could have been gained from the next best alternative. This forgone benefit is the opportunity cost.

For example, let's say a person has $20 and is trying to decide between buying a new book or going out for dinner. If they choose to buy the book, the opportunity cost would be the enjoyment they could have had from the dinner. On the other hand, if they choose to go out for dinner, the opportunity cost would be the knowledge and entertainment they could have gained from reading the book.

Key Points:

- Opportunity cost is the value of the next best alternative that is sacrificed when making a choice.
- It is based on the concept of scarcity and the trade-offs involved in decision-making.
- The opportunity cost can vary depending on the alternatives available and the individual's preferences and priorities.
- Understanding opportunity cost is important for making informed decisions and maximizing value or utility.
- By considering the opportunity cost, individuals and businesses can evaluate the benefits and costs of different options and make choices that align with their goals and priorities.