Opportunity cost is defined as the value of the product that is forgone in order to obtain or produce another product. This concept is also known as the economic opportunity loss. It is the basic concept of economics. It defines the choices made by consumers.
The concept of Opportunity cost is directly linked to economic decision making. In fact Economic Decision making is totally dependent on opportunity cost analysis. Companies- even individuals, indulge in economic decision making while deciding on a purchase.
They have to evaluate the value of the product or resource that is forgone in order to obtain another product. This is because, they are paying out of the same budget. For making a good choice they have to see what is the opportunity cost of a particular product and its alternative.