Economics view: What is an opportunity cost?

Opportunity cost =

               the cost of an alternative that must be forgone in order to pursue a certain action

OR 

-the benefits you could have received by taking an alternative action. 

In another way, it simply means that what you would have done if you could have make another decision.

It is the basic relationship between scarcity and choice.

So, what are the examples of opportunity cost in life?

Individual opportunity cost

-For instance, students face decision of choosing between college education and work. The cost of choosing education may include tuition fee, books, and many more. These are the monetary cost. In fact, the actual cost should include the opportunity cost of choosing education over work that have been ignored: wages that can be earned if the student work instead of study, probably 4 years of job experience and perhaps, time to carry out activities gone in order to allocate time for study.

Organization opportunity cost

-Firms, organization and government have to make decision too. For instance, if government decides to spend £20 billion on interest payments of national debt, the money cannot be allocated for the National Health Service. Thus, the opportunity cost of using the money to pay for national debt would be the extra money it might have allocated to the National Health Service and vice versa.

CONCLUSION

In life, resources are scarce while wants are unlimited. So, we have to make choices rationally in our life as opportunity cost happens in our decisions. If we made a wrong decision, butterfly effect can happened and it might affect our future. Thus, we must think carefully before making choices. 

                                 Written by, Woon Wen Quan
source: http://www.investopedia.com/terms/o/opportunitycost.asp