The Opportunity Cost Principle

The Opportunity Cost Principle refers to the value of the next best alternative you forgo when making a decision. It’s the benefit you miss out on because you chose one option over another. For example, if you spend time studying, your opportunity cost might be leisure or work that you could have pursued instead. Recognizing opportunity costs helps you make more informed choices by considering what you’re sacrificing with each decision, ensuring you weigh the true cost of your actions beyond just the immediate expense or effort involved.