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Economic concept
Opportunity cost
The value of the best alternative forgone when a choice is made.
All conceptsSee it at work
Why do countries trade instead of producing everything themselves?
Countries gain by specialising where their relative opportunity cost is lower and exchanging for the rest. Scale, variety and access to resources add further gains. But aggregate gains do not ensure that every worker, region or strategic sector benefits.
See it at workWhy do countries hold foreign exchange reserves?
Countries hold liquid foreign assets so they can pay external obligations, support market functioning and absorb shocks when private foreign funding disappears. Reserves buy time and credibility, but they are costly insurance rather than free wealth.