Opportunity Cost

Opportunity Cost
Opportunity cost is the cost of any activity measured in terms of the value of the other alternative that is not chosen (that is foregone). Put another way, it is the benefit you could have received by taking an alternative action; the difference in return between a chosen investment and one that is not taken. Say you invest in a stock and it returns 6% over a year.
In placing your money in the stock, you gave up the opportunity of another investment - say, a fixed deposit yielding 8%. In this situation, your opportunity costs are 2% (8% - 6%).