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Organisations and the financial system

Opportunity cost

A key concept in economics, an opportunity cost is the cost related to the second best choice available to someone who has chosen from several mutually exclusive options. Thus it is a measure of what has been foregone by a particular course of action and expresses the basic relationship between scarcity and choice. Opportunity costs are not restricted to monetary or financial costs: the real cost of output foregone, lost time, pleasure or any other benefit that provides utility should also be considered an opportunity cost.

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