Opportunity cost

Opportunity cost is the value of the best alternative forgone when a choice is made. It captures the trade-off between what is chosen and the most valuable option not chosen.

Trade-off: A trade-off is a sacrifice of one benefit or option in order to gain another. Every choice that creates an opportunity cost exchanges the forgone option for the chosen one.
Comparative advantage: Comparative advantage is the ability to produce a good at a lower opportunity cost than another producer. It explains why specialization can benefit parties even when one is more productive in every activity.
Accounting cost: Accounting cost records explicit monetary expenses incurred by an individual or organization. It can omit the value of owned resources used in their next-best alternative.
Value of time: The value of time is the benefit or income a person could obtain from an alternative use of time. Time spent on one activity often makes forgone earnings or leisure its largest opportunity cost.
Counterfactual: A counterfactual is a description of what would have happened under circumstances different from those that actually occurred. Opportunity cost depends on an unchosen outcome that cannot be observed directly.
Economic cost: Economic cost is the value of resources used, including their best alternative uses. Opportunity cost is the part of economic cost that measures the best forgone alternative.
Capital budgeting: Capital budgeting is the process of evaluating long-term investments and deciding which projects to fund. Choosing one project means forgoing returns available from competing investments.
Explicit cost: An explicit cost is a direct payment made for a resource or service. Opportunity cost can include noncash forgone value beyond explicit payments.
Reservation wage: A reservation wage is the lowest wage at which a person is willing to accept a job. It reflects the value of the best alternative to taking that job.
Revealed preference: Revealed preference infers preferences from choices made under known constraints. Observed choices can help estimate which alternatives people value most, though they do not reveal every motive.

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