In economics, an opportunity cost is the value lost by choosing one alternative instead of another. It is the value of the sacrificed alternative in choosing something else.
Economic Opportunity Cost
An example of this is doing a job that pays only $5 per hour when you could have taken a different job at $12 per hour has an opportunity cost of $7 per hour. Wasting three hours stuck in traffic has an opportunity cost of the money you could have been making for those three hours.
It is not necessarily associated with a monetary cost, and can be applied to any decision of value. For example, a person could choose to eat pizza instead of a salad for lunch. Because they passed up the opportunity to eat a salad, the salad is an opportunity cost.
Opportunity cost is not recognized in calculating accounting cost and profits, but is recognized in calculating economic costs and profits. Due to the concept of opportunity cost, it may be more economically advantageous to pass up opportunities that would seem profitable from an accounting standpoint. For instance, a famous basketball player might seem to save money by mowing his lawn himself instead of hiring somebody else to do it, but if this cost him the opportunity to make thousands of dollars by playing in a game that night, the opportunity cost of mowing his own lawn would be thousands of dollars.