Explain the concept of opportunity cost and provide an example.

Explain the concept of opportunity cost and provide an example.

The concept of opportunity cost refers to the value of the next best alternative that is forgone when making a decision. It is the cost of choosing one option over another.

For example, suppose a student has to decide between studying for an economics exam or going to a party. If the student chooses to study for the exam, the opportunity cost would be the enjoyment and socializing at the party that is forgone. On the other hand, if the student chooses to attend the party, the opportunity cost would be the potential higher grade that could have been achieved by studying for the exam.