What are the concepts involved in economic cost?

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pohnpei397 eNotes educator| Certified Educator

Economic costs involve both explicit and implicit costs.  They take into account both what is actually spent on something and the opportunity cost of doing it.

Explicit costs are the payments you actually make in order to do something like running a business.  If you own a business putting logos and other designs on t-shirts, you have explicit costs like the cost of the t-shirts and the wages of your employees.

Implicit costs are the opportunity costs of running your business.  In the example given above, imagine that you had quit your job to run this business.  You implicit cost would be the salary that you gave up when you quit.