Opportunity Cost

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Opportunity Cost defines the relationship between choice and scarcity. When there are two or more alternatives or choices, an individual chooses one alternative at the cost of loosing benefits of the unchosen alternative. It is called opportunity cost. It can also be defined as the sacrifice that is related to the second best choice. It cannot be assessed in monetary terms alone, but also in the terms of a value of a thing.

For Example:
A child likes to play Cricket as well as watching a cricket match on T.V. one day, at the time of his playing Cricket, there happens to be a live telecast on T.V.

In the above written case, if the child chooses to play, the opportunity cost of playing cricket will be equal to the loss of enjoyment that he can have while watching the live telecast.

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