What is "Opportunity Cost" ?

The cost of sacrificing one opportunity is known as opportunity cost. The concept
was first developed by an Austrian economist, Wieser.
This concept compares what is lost with what is gained, based on your decision. The opportunity cost of anything is the alternative that has been foregone. This implies that one product can be produced only at the cost of foregoing the production of another product. Opportunity cost analysis also plays a crucial role in determining a business's capital structure.

Opportunity Cost Equation-
Opportunity cost = Opportunity cost of selected alternative - Cost of next best alternative.

Example 1- The opportunity cost of working for Company A is the value of what we gave up to take the job. We gave up the value of working for Company B, so that is the opportunity cost of choosing to work for Company A.

Example 2-A student considers the cost of a  two years post graduation education by calculating total tution and expanses for the period. They may also Include the opportunity cost of missing 2 years of salary in their calculation.