What is the term for the loss of potential gain from other alternatives when one alternative is chosen?

Opportunity cost refers to the value of the next best alternative that is forgone when a particular choice is made. It highlights the trade-offs inherent in any decision-making process. When an individual, business, or government decides to allocate resources in a particular way, the opportunity cost represents what they give up in order to pursue that choice instead of another viable option. This concept is fundamental in economics, as it emphasizes the importance of considering not just the immediate benefits of a decision but also the potential gains that could have been achieved through an alternative course of action.

In various scenarios, recognizing opportunity costs can lead to more informed and effective decision-making, ensuring that resources are utilized in the most beneficial way possible.