Opportunity cost refers to the value of the next best alternative that is forgone when making a decision. For example, if you choose to spend your time studying for a math exam instead of going out with friends, the opportunity cost is the enjoyment and experiences you miss by not socializing. This concept applies to various choices in life, from financial decisions to time management. When you decide to invest money in a stock rather than a savings account, the opportunity cost is the potential interest you could have earned in the account. Understanding opportunity cost helps individuals make more informed choices.