Meaning and Definition of Opportunity cost

Definition of opportunity cost

The concept of cost of chance (which in some places can appear as opportunity cost) is a concept that comes from the economic area and that is used in the world of finance, business and micro and macroeconomias to refer to an abstract measure of investment from which are practical estimates of management of the capital which can be a company or a business.
It is considered that the concept of opportunity cost exists since the beginning of the 20th century, more specifically since 1914, year in which was invented by economist Friedrich von Wieser. Probably, the emergence of this term or concept having to do with the economic situation of the context posed one growing approach to the crisis and the 1st World War.
In specific terms, the concept of cost or opportunity cost is used in economics to indicate that cost which means entire investment when priority is given a chance to the other. Thus, the opportunity cost represents something imaginary or fictitious, i.e., that investment that was not performed to prioritize other considered to be most urgent, most important, necessary, etc. Although at first, the idea of opportunity cost might seem vain or uninteresting since it is based on what happened in practice, yes win useful when designing future is what might be the costs of choosing an investment and not the other. Also serves to know what happened and how that decision may have benefited or not to the company, partners, institution, etc.
For example, the opportunity cost would choose between two possible investments: savings in a branch of a chain of fast-food place or put an own restaurant. The choice is obviously taking into account what can be considered more beneficial: thus, that choice is an opportunity cost because to have been elected should measure or take into account the cost to that election (timely or not) can mean to those who carry forward the business. In this regard, it is important to make clear that the opportunity cost is related to the concept of profitability since it is, in short, one more element to measure the profitability of an investment choice has about the business.