Quick Definition

Opportunity cost refers to the potential benefits an individual, investor, or business misses out on when choosing one alternative over another.

Examples

• 1Choosing to invest in stock A instead of stock B, which later increases significantly more in value.
• 2Spending time watching TV instead of working on a side business that could generate additional income.
• 3Using spare cash to buy a luxury item instead of saving for a higher education course that could increase earning potential.
• 4A company decides to allocate funds to upgrade office equipment rather than investing in research and development, potentially missing out on innovative product opportunities.

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