The concept of opportunity cost is attributed to the alternate uses of scarce resources. Resources both natural and man made, are scarce in relation to their demand to satisfy the ever growing human needs and the resources have alternative use. The scarcity and the alternative uses of the resources give rise to the concept of opportunity cost.

Opportunity cost of availing an opportunity is the expected income forgone from the second best opportunity of using the resources.

The opportunity cost is also called Alternate Cost, had the resources available to a person, a firm or a society been unlimited there would be no opportunity cost. But since resources are limited, opportunity cost can never be zero.