opportunity cost investment & finance definition
The
cost of pursuing one opportunity or action, measured by what had to be given up
in the course of choosing that opportunity. For example, opportunity cost may
be not having the money to make an alternative investment because it has been spent
on something else. Another type of opportunity cost occurs when a company can’t
expand in a certain area because expansion is already occurring in one region
and the company’s resources would be stressed.
See opportunity cost in Wall Street Words
The best alternative that is forgone because a particular course of action is pursued. An example is the interest income that is given up when large balances are kept in a checking account. Likewise, purchasing a home means that less money is available for another investment.
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