An essential concept in finance and investment that helps to evaluate the potential benefits lost when choosing one option over another.
Opportunity cost refers to the loss of potential gain from other alternatives when one alternative is chosen. In finance, this concept is crucial as every financial decision involves trade-offs. For instance, if you invest your money in stocks, the opportunity cost is the interest you could have earned if you had kept that money in a savings account. Understanding opportunity cost allows individuals and businesses to make better financial decisions by assessing the relative value of different choices.
The cost of something is what you give up to get it. - Scarcity Principle
