What is an opportunity cost? How does the idea relate to the definition of economics? Which of the following decisions would entail the greater opportunity cost: allocating a square block in the heart of New York City for a surface parking lot or allocating a square block at the edge of a typical suburb for such a lot? Explain.

A resource can be used for different purposes, but an individual has to settle for the best option because of its limited availability.The cost incurred by a person for not choosing the other options is the opportunity cost.

For example, suppose a person is hungry and wants to buy food to satisfy hunger. He has a budget of $10 to spend on food. With this budget, he can buy a burger or a pizza. Here, the budget of $10 is the limited resource, and the availability of two foods (pizza & burger) at this price range is the alternative. If he buys pizza instead of a burger, the cost of not choosing a burger is the opportunity cost. Hence, opportunity cost can be defined as the loss an individual faces on the forgone goods and services.

Economists suggest choosing the best alternative for utilizing any resource and other forgone alternatives. When an individual decides to let go of other options while determining the best option, the individual's cost incurred is the opportunity cost.

The concept of opportunity cost is applied while deciding the best alternative. Economists suggest choosing the best alternative, and the opportunity cost helps compare all the possible options during decision-making. In this way, opportunity cost is associated with the idea of economics.

The price of the land in the city will be higher relative to the price of land at the edge of the suburb. Thus, the cost associated with the square parking block will be greater in the city than in the suburb. Therefore, allocating a plot for surface parking in the heart of New York City will entail more opportunity costs than allocating it on the edge of the suburb.