Opportunity cost is the value of the next best alternative that you give up when making a choice. For example, if you decide to spend your Saturday working on a project instead of going to the movies with friends, the opportunity cost is the enjoyment and fun you miss out on by not going to the movies. Understanding opportunity cost helps you make better decisions by considering what you are sacrificing. Whether it's time, money, or resources, recognizing these trade-offs can lead to more informed choices in your life, such as deciding between saving money for a vacation or spending it on dining out.