Previous Page

Implicit cost

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

Table of Contents

Implicit Cost

Implicit cost is an economic term that refers to the cost of resources that are not directly paid for. These costs are not recorded in the company’s financial statements, but they still have an impact on the company’s profitability. Implicit costs are also known as opportunity costs, as they represent the cost of not using the resources for other purposes. For example, if a company owns a piece of land, the implicit cost of not selling the land is the potential profit that could have been made from the sale.

History of Implicit Cost

The concept of implicit cost was first introduced by the Austrian economist Friedrich von Wieser in the late 19th century. Wieser argued that the cost of resources that are not directly paid for should be taken into account when making economic decisions. He argued that these costs should be included in the calculation of economic profit, as they represent the cost of not using the resources for other purposes. This concept has since been adopted by economists and is now widely used in economic analysis.

Comparison of Implicit and Explicit Costs

Cost Type Definition Example
Implicit Cost Cost of resources that are not directly paid for Opportunity cost of not selling a piece of land
Explicit Cost Costs that are recorded in the company’s financial statements Cost of materials used in production

Summary

Implicit cost is an economic term that refers to the cost of resources that are not directly paid for. These costs are not recorded in the company’s financial statements, but they still have an impact on the company’s profitability. Implicit costs are also known as opportunity costs, as they represent the cost of not using the resources for other purposes. For more information about implicit cost, you can visit websites such as Investopedia, The Balance, and Investing Answers.

See Also

  • Explicit Cost
  • Opportunity Cost
  • Marginal Cost
  • Average Cost
  • Fixed Cost
  • Variable Cost
  • Sunk Cost
  • Economic Profit
  • Accounting Profit
  • Total Cost

Do you like the post? Share it now:

AnalyticsTrade Team

AnalyticsTrade Team

🎉 Introducing AnalyticsTrade's exceptional team of expert analysts! 🌟 These seasoned pros have been dominating the capital market, trading a diverse range of assets for more than 15 years! 📈💹 Get ready to level up your game with our top-notch, captivating resources in the capital market! 🚀📚

Was this article helpful?

X

Thank You for Contacting Us!

Your email has been successfully submitted and we will get in touch with you shortly