Final answer:
Opportunity cost represents the value of the next best alternative that is given up when making a choice. For example, by choosing to work on a school project instead of going to a party, one forgoes the social experience in order to potentially improve their academic grade. This concept reminds us that every decision incurs a potential trade-off.
Step-by-step explanation:
An example of opportunity cost affecting me personally occurred when I had to decide between attending a friend’s birthday party and working on a major school project which was due the next day. The opportunity cost of attending the birthday party would be the time that could have been spent on my project, potentially improving my grade. The opportunity cost of working on the project was missing out on the social experience and fun of the birthday party.
Opportunity cost is the value of the next best alternative given up when making a decision. For instance, if a person chooses to spend money on a new smartphone, the opportunity cost could be the vacation they cannot take now due to spending their savings. The principle of opportunity cost emphasizes that in order to gain something, we must forgo the potential benefits of alternative options.