Economic Principle of Opportunity Cost

Definition

The economic principle of opportunity cost refers to the concept that in order to obtain one thing, we must give up something else. It involves making decisions by considering the value of the next best alternative that is forgone.

Related terms

Scarcity:

Scarcity refers to limited resources and unlimited wants, which leads to having to make choices and incur opportunity costs.

Trade-off: A trade-off occurs when choosing one option over another involves sacrificing some desirable benefit.

Rational decision-making: Rational decision-making involves systematically weighing alternatives and choosing the most beneficial option based on available information.