how to find opportunity cost

To find the opportunity cost, use this basic formula: Opportunity Cost = Return on the Foregone Option − Return on the Chosen Option This means calculating the difference in expected or actual returns between the option not chosen and the option that was chosen. Essentially, it quantifies what you give up by making one choice over another, whether in terms of money, time, or resources. For example, if choosing investment A yields a 10% return and investment B yields an 8% return, the opportunity cost of choosing B over A is 2%. In a business context, it helps evaluate trade-offs to make more profitable decisions by comparing benefits of alternatives. Non-monetary factors like time, effort, and risk should also be considered, though they are harder to quantify.