Opportunity cost is the value of what you give up when you choose one option over another. Every decision has a cost — not just the money you spend, but the benefit you miss out on from the alternative you did not choose.
Example: You have $50,000 and two options — invest in stocks or start a side business. If you choose stocks and earn 12% ($6,000), but the business would have earned $15,000, your opportunity cost is $15,000 — the profit you gave up by not choosing the business.
Opportunity cost applies to time too. Spending 4 years in college means giving up 4 years of full-time salary. Economists estimate the average opportunity cost of a bachelor's degree at $100,000-150,000 in foregone earnings — though the degree typically pays for itself many times over in higher lifetime earnings. As economist Frederic Bastiat taught: always consider the unseen consequences of your choices.