Opportunity Cost
Opportunity cost is the value of something you give up to obtain another thing. It can also be thought of as "the next best thing". Opportunity cost is not monetary but can be applied when money is involved. An example of opportunity cost would be if you have two choices: to work all day and make some money or to take the day off and go to a movie that you have been waiting to see for a long time. If you choose the movie, the opportunity cost is the money that you could've made working all day. If you choose the work, the opportunity cost is the joy you would receive from seeing the movie.

The opportunity cost in a situation is always present when a choice must be made between two things. It must be considered when determining which scenario brings the most marginal benefit. The cost of going to a Boston College football game is not only the $100.00 that it costs to buy a ticket. The cost of the alternative must be taken into account. Work could get done, the sports page could be read, and quality time with family members could be spent. A price can be attached to each of these activities. All together, they make up the opportunity cost of going to the game. Opportunity costs are important when making the best economical decision. In order to acquire the most marginal benefit, all factors need to be taken into account.

Sample Question:
Amy is deciding what she wants to do today. She has two choices. Either go to the mall with her friends or go to school and learn math. Let's say Amy decides to go to the mall. What is her opportunity cost?

A. Missing out on her math education.
B. Not learning english.
C. Seeing her grandmother.

Answer: A, because she went to the mall instead of going and learning math.

Links to Other Websites
Wikipedia Definition and Examples
Cost of Trade-offs
Economists and Opportunity Costs