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In economics, an implicit cost, also called an imputed cost, implied cost, or notional cost, is the opportunity cost equal to what a firm must give up in order to use a factor of production for which it already owns and thus does not pay rent. It is the opposite of an explicit cost, which is borne directly. [1]
The opportunity costs associated with the epidemic, including lost productivity, slower economic growth, and weakened social cohesiveness, are known as implicit costs. Even while these costs might be more challenging to estimate, they are nevertheless crucial to comprehending the entire scope of the pandemic's effects.
In accounting, there is a different technical concept of cost, which excludes implicit opportunity costs. In common usage, as in accounting usage, cost typically does not refer to implicit costs and instead only refers to direct monetary costs. The economics term profit relies on the economic meaning of the term for cost.
Opportunity cost is also often defined, more specifically, as the highest-value opportunity forgone. So let's say you could have become a brain surgeon, earning $250,000 per year, instead of a ...
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In economics, profit is the difference between revenue that an economic entity has received from its outputs and total costs of its inputs, also known as surplus value. [1] It is equal to total revenue minus total cost, including both explicit and implicit costs. [2]
The comparison includes the gains and losses precluded by taking a course of action as well as those of the course taken itself. Economic cost differs from accounting cost because it includes opportunity cost. [3] [2] [4] (Some sources refer to accounting cost as explicit cost and opportunity cost as implicit cost. [2] [4])
Implementation shortfall is a commonly targeted benchmark, which is the sum of all explicit and implicit costs. Sometimes, an opportunity cost of not transacting is factored in. [5] After measurement, costs must be attributed to their underlying causes. Finally, this analysis is used to evaluate performance and monitor future transactions.