Opportunity cost is a very important concept in the study of economics as it affects the decision making of consumers, workers, producers and governments. Opportunity Cost is the cost of the next best opportunity forgone when making a decision.
Every choice made has an opportunity cost because in most cases there is an alternative. some examples of opportunity cost are as follows:
Example 1: The opportunity cost of going to church on Sunday morning could be resting at home instead of going to church.
Example 2: The opportunity cost of building an additional school by the government is using the same funds to build more hospital to increase the health and reduce mortality rates.
Opportunity cost arises because individuals, producers, governments have to make competing choices due to finite or limited resources. Thus, there is a need to make a choice when allocating scarce resources which ultimately leads to opportunity cost.