Last Updated on 16/01/2026
Opportunity cost is the value of the next best alternative you give up when you choose one option over another.
It is what you lose by not choosing the best alternative option.
Why opportunity cost matters
- Helps make better financial and business decisions
- Forces comparison between available alternatives
- Highlights hidden costs beyond money
- Essential in investment, trading, and resource allocation
Opportunity cost vs Sunk cost
- Opportunity cost: future value you give up
- Sunk cost: past cost that cannot be recovered (should not affect decisions)
Key takeaway
Every decision has a cost—even if no money is paid.
The true cost of any choice is the value of the best alternative forgone.
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