What economic term refers to the loss of potential gain from other alternatives when one alternative is chosen?

The term that refers to the loss of potential gain from other alternatives when one alternative is chosen is opportunity cost. This concept is fundamental in economics and highlights the trade-offs that individuals, businesses, and governments face when making decisions about how to allocate their scarce resources.

When a choice is made, opportunity cost represents what is foregone—the benefits or value that could have been realized if a different option had been selected. For instance, if an individual chooses to spend money on a concert ticket instead of saving that money for a new computer, the opportunity cost is the enjoyment and utility derived from the new computer that is lost by not purchasing it.

This term underscores the importance of considering not just the direct costs of an action, but also the value of the next best alternative that is not pursued. The principles of supply and demand, marginal utility, and comparative advantage relate to economic decision-making but do not specifically address the concept of lost alternatives tied to a decision made.