Opportunity Cost
Definition
Opportunity Cost: Opportunity cost is the value of the best alternative you give up when making a choice. Every decision—to build a feature, hire a role, pursue a market—means not doing something else. Understanding opportunity cost ensures you're choosing the highest-value option, not just a good one.
Example Usage
“Building feature X meant not building Y. Feature Y could have generated 3x the revenue—that opportunity cost taught us to compare alternatives explicitly.”
Common Misconceptions
Related Terms
Cost-Benefit Analysis
Cost-benefit analysis systematically compares the costs and benefits of a decision, project, or policy. By quantifying both sides in comparable terms...
Sunk Cost Fallacy
The sunk cost fallacy is the tendency to continue investing in something because of previously invested resources (time, money, effort) rather than fu...
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