Question

Complete the sentence.

Imagine that you have won $100 in the state lottery. You have a choice between spending the money on shopping now or putting it away in a savings account for one year. You decide to spend the money now on shopping. Thus, you will lose the interest that you could have earned by saving the money. The lost interest is the_____
cost of spending money now.

Answer 1

The lost interest is the opportunity cost of spending money now. Opportunity cost is defined as what you give up, to gain something else. Due to spending the money now instead of saving it, you are giving up the interest you could have accrued to gain what yous spend the money on now.

Answer 2

Or another way to say that is the Opportunity cost