Difference Between Trade-off and Opportunity Cost (with Comparison Chart)

opportunity cost vs trade off Economics is all about making choices, in order to make best possible use of the scarce resource. Whenever we make a choice among diverse alternatives, we have to forgo other options. In this context, two economic terms are often misconstrued, which are the tradeoff and opportunity cost. While a trade-off denotes the option we give up, to obtain what we want .
On the other hand, the opportunity cost is the cost of the second best alternative given up to make a choice. In other words, it is the cost of the opportunity that is missed and so it makes a comparuison between the project accepted and the refuse one .
Take a read of the article ; that attempts to shed alight on the differences between tradeoff and opportunity monetary value.

Content: Trade-off Vs Opportunity Cost

Comparison Chart

Basis for ComparisonTrade-offOpportunity Cost

MeaningTrade-off implies the exchange of one thing to get the another.Opportunity cost implies the value of choice foregone, to get something else.

What is it?The choices sacrificed.The value of next best alternative.

RepresentsWhat is given up to get what is wanted?What could have been done, with what was given up?

Definition of Trade-off

In economics, tradeoff means the substitution, in which a person sacrifices one or more things for getting a finical product, serve or experience. It refers to all the courses of action which could be employed, other than the present one. It is a deal, that arises as a compromise, wherein to obtain a certain aspect we have to lose another aspect .
In other words, while making a survival, we have to accept less of something, for obtaining more of something else, the consequence would be tradeoff. For example : Suppose a caller wants to start a project, which requires huge investment and other resources, so the tradeoff entails the decrease in certain expenses, in ordain to invest more in the modern project. Hence, tradeoff implies the direction of forsaking one or more desirable alternatives, in retort for obtaining a assign result.

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Definition of Opportunity Cost

opportunity cost or option cost, as the name suggest, is the cost of opportunity lost, i.e. an opportunity to generate tax income is lost, because of the scarcity of resources such as british labour party, material, capital, plant and machinery, country and so on. It is the actual return of the abandon option, which can not be obtained, due to the scarcity of resources .
As we know that resources are available to us, in a restrict quantityr, but these resources have divers uses, with change returns. indeed, the resources are employed to the most productive manipulation, by sacrificing the adjacent best function of the resources. Hence, the opportunity cost is the total of rejoinder that is expected to be generated when the resources are put to the second best alternative .
For example : suppose after pursuing MBA you have two options available to you. One, to start your own commercial enterprise and earn 10 hundred thousand per annum or join a company and get 12 hundred thousand per annum. therefore, if you commence your own commercial enterprise you will earn 10 hundred thousand per year, but you will not get 12 hundred thousand. This 12 hundred thousand is your opportunity price, which you will get for serving the company and not starting your own business .
The opportunity monetary value of a class of military action can be different for different individuals or entities, because it is determined by a person ’ sulfur needs, wants, money and time. therefore, what is valued more for an individual than any other thing, vary among individuals, while deciding the room in which resources are to be allocated.

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Key Differences Between Trade-off and Opportunity Cost

The difference between tradeoff and opportunity cost can be drawn clearly on the pursuit grounds :

  1. The trade-off is a term used to describe the courses of action given up in order to perform the preferred course of action. Conversely, the opportunity cost is defined as the cost of opting one course of action and forgoing another opportunity, to undertake that course of action.
  2. Trade-off refers to all the other alternatives which are foregone, to do what we want. On the contrary, the opportunity cost is the expected return on an investment, other than the existing one.
  3. A trade-off represents, what is renounced, to get what is wanted or desired. In contrast, opportunity cost represents, what amount could be received, if the resources are put to the next-highest-valued alternative.


The concept of scarcity gave parentage to the impression of tradeoff and opportunity cost. These immediately apply the principle of scarcity, as people have to decide, which one to choose among diverse alternatives while spending their time and money. The opportunity cost of choosing a project over the other, i.e. it is the option you must give up while making a choice. On the early hand, tradeoff refers to all the other actions which we could be doing, apart from what we are doing .

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