Opportunity cost is the cost of spending efforts or funds on one project or investment instead of another. It involves an analysis of trading off one thing for another. It means the cost of something as measured against a lost opportunity, or the most valuable alternative. The concept of opportunity cost looks for the hidden cost of any and every individual economic decision.
Scarcity of resources is one of the more basic concepts of economics. Scarcity necessitates trade-offs, and trade-offs result in an opportunity cost. For example, "If the state spends $200 million more on prisons, it will have $200 million less to spend on schools." Another example is the earned income lost when someone pursues higher education. Opportunity cost is often used to justify the high fees charged by lawyers and doctors, since they gave up years of earnings to attend law or medical school.
