Opportunity Costs and Economic Costs

Macroeconomics Experts define the Opportunity Cost as the loss of goods foregone when performing a choice, i.e. by committing resources available for a particular purpose to the detriment of other choices. This is the estimated cost of something in terms of opportunities unrealized, or the value of the best alternative unrealized (Heymann & Bloom 1990).

In simpler terms, in a situation when an individual is faced with several choices, the opportunity cost of a given choice is the best gain (gain in absolute, not relative to the particular choice) that can be obtained by choosing one of the ...