Opportunity Cost

In economics, opportunity cost refers to the benefits or value that business owners, small enterprises, organisations, investors, or individuals miss out on when they choose to do something different.

The comparison of one economic option to the next best one is known as opportunity cost. When deciding between investment possibilities, these comparisons are common in finance and economics.

Calculating Opportunity Cost

• An investor calculates the opportunity cost by comparing the returns of two options. This can be done during the decision-making process by estimating future returns.
• Alternatively, the opportunity cost can be calculated with hindsight by comparing returns since the decision ....