Implicit+Costs

Implicit costs are the hidden expenses in a transaction. Implicit cost is forgoing the opportunity to produce alternative goods and services. For example, if one decides to go to a movie on Friday night, the explicit costs would be obvious. The movie ticket, the popcorn and drink are all examples of explicit costs. Implicit costs include the pay the moviegoer would have earned if he had chosen to work that night.
 * Implicit Costs:**

An accountant views economic profit differently than an economist. An economist INCLUDES the implicit costs when calculating the profit while an accountant doesnt. This is because the amount of money that could be made or lost during the time something else is done is still a cost, just one that gets overlooked. Because of this many people don't take implicit costs into consideration when making economic decisions. When adding implicit costs, some of the everyday decisions such as mowing your neighbors lawn or instead playing a round of golf, can be looked at much differently.

Example Problem: John decides to take a day off work on Friday and instead buy and then play NHL 2009 on his new Xbox. What is the Implicit cost to John's decision? (Answer at the bottom of the page)

This picture shows the difference in profit when calculated from an accountant's perspective as well as an economist's perspective.

Links to other websites 1. http://www.unc.edu/depts/econ/byrns_web/Economicae/Essays/Profit.htm 2. http://www.businessdictionary.com/definition/implicit-cost.html 3. http://en.wikipedia.org/wiki/Implicit_cost

media type="youtube" key="odK5TJkAf0M" width="425" height="350" The implicit cost of the "mythbuster crew" skipping work is essentially the pay they would have recieved, if they decided to go to work.

Answer to example problem: They pay John would have recieved if he chose to work instead of playing Xbox.