In
microeconomic theory, the
opportunity cost of a choice is the
value of the best alternative forgone, where a choice needs to be made between several
mutually exclusive alternatives given limited
resources. Assuming the best choice is made, it is the "cost" incurred by not enjoying the
benefit that would be had by taking the second best choice available. The
New Oxford American Dictionary defines it as "the loss of potential gain from other alternatives when one alternative is chosen". Opportunity cost is a key concept in
economics, and has been described as expressing "the basic relationship between
scarcity and
choice". The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently. Thus, opportunity costs are not restricted to monetary or financial costs: the
real cost of
output forgone, lost time, pleasure or any other benefit that provides
utility should also be considered opportunity costs.