Opportunity Cost:

Economists used the term opportunity cost to mean the next best alternative forgone in the process of making a choice. To an individual consumer, the opportunity cost of a commodity bought is the next most desirable commodity he could have bought instead. For example, a housewife desires a tin of rice and a tin of beans each selling for N200. But since she had only N200, she edecided to buy a tin of rice. The opportunity cost of a tin of rice bought is a tin of beans forgone.

The concept of opportunity cost is central to the study of econonomics because it guides the individual, the firm or the govenment to make rational decision on the use of scarce resources. Opportunity cost is alternatively referred to as real cost or economics cost.

Note that, the accountant's review of cost i.e. (accounting cost) is quite different from the economist's view of cost i.e. (opportunity cost).

To the accountants, the cost of a commodity purchased by the consumer or a factor of production purchased by the firm is the amount of money paid to have that commodity or productive resources. This is called money cost or accounting cost.