Opportunity Cost

What is an opportunity cost?

• The cost of missing out on the next best alternative

• The benefits that could have been gained by taking a different decision

What is one reason why opportunity cost is important?

For most businesses resources are limited (particularly new businesses)

What is another reason for why opportunity cost is important?

When resources are limited, decisions have to be made about what to spend/invest and where to focus

What is a third reason for why opportunity cost is important

Entrepreneurs and business management take calculated risks and weigh up the potential implications of decisions (opportunity costs) before choosing the options they believe are best for their business