Opportunity Cost
Opportunity cost is the benefit foregone from the next best alternative when a choice is made. It reflects the real cost of any economic decision, measured not in money but in what must be sacrificed. It applies to individuals, firms, and governments making any choice under conditions of scarcity.
Real World
When the UK government spent £37 billion on the Test and Trace programme during COVID-19, the opportunity cost included thousands of new nurses, teachers, or social housing units that funding could have provided.
Exam Focus
Always identify the specific next best alternative — vague references to 'other things' will not score.
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