Trade-off vs. Opportunity Cost: What's the Difference?

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Key difference

The difference between ‘trade-off’ and ‘opportunity cost’ is that ‘trade-off’ is to sacrifice one of the two options you had in order for what you want, it may be in case of money, property or any of belongings that one gives up for something more important. Whereas, the opportunity cost is the cost of the opportunity lost and a way to get over the losses.

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Trade-off vs. Opportunity Cost

Trade-off and opportunity cost are both very common and related terms in economics. But they are quite different terms. Trade off is basically defined as giving up on or sacrificing one of your belonging in order to attain what you truly want. It always shows an indirect relation to the thing sacrificed or chosen over the choice. For example, in ancient times the term trade-off was quite common. As people used to exchange what they had, with what they wanted. This is an indirect relation between the choice you made and belonging you have. But when it comes to opportunity cost, the opportunity cost is basically the cost that you have chosen as an alternative to fulfil the loss you made by choosing one of the two choices or alternatives.

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Comparison Chart

BasisTrade-offOpportunity Cost
DefinitionIt is a situation in which belonging is compromised in order to get something else.Opportunity cost is choosing one of the two choices and missing the benefits given by the alternative opportunity.
Basic DifferenceIn selection process of what you want, the belonging is sacrificed completely.You go for a better alternative.
BenefitIt does favour getting what actually was demanded, but on the cost of any other thing, you possess.Though you missed an alternative yet, you made a choice of better alternative and hence are more beneficial.
Relation to other ChoicesIs indirectly related to what you sacrificed as an increase in the demand of choice you made would let a constant decrease to the one you sacrificed.Though it is also indirectly related to other alternative, losses are not considered as you go for a better alternative fulfilling opportunity that was lost.
CalculationThere is no such formula for calculation of trade-ff.Opportunity cost = return of most beneficial option – the return of the chosen option.
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What is a trade-off?

The trade-off may be defined as selecting one of the two things. This automatically leads to sacrificing the other. Let’s go for an example in our daily lives, if we are to buy a skating board and a carom game at the same time, but when it comes to our wallet, we come to know that we can not afford both at the same time. So we sacrifice one of the two things. We would obviously choose the thing we needed or liked more about, over the thing we wished to have but was not as essential as the thing chosen. The trade-off is a typical economics term which just shows the importance of one thing over another and loss is calculated or figured out which was made to get the desire.

What is the Opportunity Cost?

Opportunity cost is the loss that you might have saved by making another choice yet you did not entirely give up on what you was needed. Usually, trade-off leads to choices and that lead to the opportunity cost. For example, you chose carom over skating board. When you left the shop, and you saw another shop that was giving a discount or an offer that could have made you buy both your choices. But at the same time, you made a choice, and you do have one of the two things but selecting shop wisely, could have given you a chance to utilize your money more smartly. Usually, the opportunity cost is calculated by the following formula: Opportunity cost = return of most beneficial option – the return of the chosen option

Key Differences

  1. The trade-off is the selection of one of the two available choices given and leads to sacrifice of one choice or belonging either in term of quality, quantity or property. While trade-off leads to opportunity cost where selecting a wrong option may lead to the loss of the most beneficial option that was ignored.
  2. Trade-off does not count the loss or gain but is a selection based on time, choice or any other reason by the person. Whereas, when it comes opportunity cost, then term directly relates to the profit which might have been made but lost due to wrong selection of choice.
  3. Opportunity cost is the cost that might have been profit if the choice opted keenly, but it does not mean any loss whereas, the trade-off means losing one thing in order to get another.

Conclusion

After analysis of your trade-off, the cost could be known for you have given up and what you have gained. If the thing or cost you have given up is less than that you selected you are at no loss hence, there is no opportunity cost. If giving up a choice, you did not prefer to select cost more than your selection; you definitely are at a loss, and this would be defined as opportunity cost.