Clarifying (Opportunity) Costs

Abstract

Opportunity cost is considered to be a fundamental concept in economics. But the definition of the term continues to be controversial. I describe how the term is widely used in two distinct ways, both in the academic and non-academic literatures. I propose a practical way for educators to clarify the concept and related terminology.

Keywords: Opportunity cost, implicit cost, explicit cost, economic cost

JEL Classification: A22, A21