Opportunity Cost

Opportunity Cost:
the best alternative that we forgo, or give up, when we make a choice or a decision. 

Every decision means giving up something.  Economists are fond of trade-offs as a way of thinking about decision making.  Taking one action usually means giving up something else. 

As the text states, “The full ‘cost’ of making a specific choice includes [the value of] what we give up by not making the best alternative choice.”

Opportunity costs arise because resources are scarce. Scarce means limited.  Resources are scarce because human wants exceed what we can produce from our current resources.