The opportunity cost of goods or services is the value of all the goods or services that we must give up to produce the chosen goods or services.

There is a cost associated with every decision. Everything a business does has an opportunity cost. When we use resources efficiently, we reduce opportunity costs. The key to sound economic practice is ensuring that we use all resources in the most efficient ways possible, and reducing the opportunity costs.

What is the opportunity cost of producing half a hectare of wheat and half a hectare of cotton, instead of one full hectare of wheat or one full hectare of cotton? To increase the production of cotton, we must use resources that could otherwise be used to produce wheat. We give up the opportunity to produce one hectare of wheat. You can't eat cotton. You can't wear wheat. What do you need the most?
What is the opportunity cost of building low-cost housing on premium city-centre real estate? In exchange for long-term, high-return property taxes, a needy community is provided with safe, secure, and affordable housing near required support facilities. What do you need the most?
 

Think about this...

You have applied for a summer internship with a local veterinarian. Before she makes her decision, however, she wants you to work the next four Saturdays from 10:00 a.m. until 2:00 p.m., to see if you fit with the team, and the team fits with you. However, you already have a regular job every Saturday from 9:00 a.m. until 6:00 p.m. at the local convenience store. The wages aren't as good as you would earn with the vet, but your employer has assured you full-time employment over the summer.

What would you do? What are the opportunity costs associated with your decision?

There is no right answer. Your decision will have opportunity costs for you. Those costs might be different for someone else, even if the decisions are the same .