An opportunity cost is the value of your best alternative to a decision. It is a concept that stems from economic theory that can be used to model decisions. In economics it is used to model the basic relationship between scarcity and choice. Every business or individual has limited resources. As such, each decision commits resources that could have been used to do something else. For example, if you choose to work late to finish a document, your opportunity cost may be a few hours playing with your kids.
What you give up by making a decision or committing resources to a strategy.
Spending $5 on an ice cream cone means that you have $5 less to spend on other things such as toys or amusement park rides.
In any decision, it's helpful to understand both what you're gaining by committing to a strategy and what you're giving up in terms of missed opportunities.
This is the complete list of articles we have written about decision making.
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A list of decision making techniques.
The observation that groups may make collective decisions that are viewed as wrong or irrational by each individual member of the group.
A complete guide to the decision making process.
The difference between rational thought and logic.
The common types of uncertainty in decision making and strategy.
A definition of information costs with examples.
A definition of reverse brainstorming with examples.
The definition of decision fatigue with examples.
Taking a position that you do not necessarily agree with for the purposes of argument.
The definition of paradox of choice with examples.
An overview of problem solving with examples.
A list of thinking approaches and types.
A definition of workaround with examples.
A list of common creative thinking techniques.
A list of common types of problems.
The definition of analysis paralysis with examples.
The definition of the arrow of time with examples.
An overview of common business problems.
The definition of decision framing with examples.
The common types of research.
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