What term describes the cost of choosing one option over the next best alternative?

The term that describes the cost of choosing one option over the next best alternative is opportunity cost. Opportunity cost refers to the value of the next best alternative that is foregone when a decision is made to pursue a certain action. It highlights the concept that resources are limited and that every choice involves a trade-off, as selecting one option means sacrificing potential benefits from alternative choices.

For example, if a student decides to spend time studying for an economics exam instead of working a part-time job, the opportunity cost would be the wages they could have earned during that time. Understanding opportunity cost helps individuals and businesses make more informed decisions by considering what they are giving up when selecting one path over another.