Define Implicit and explicit cost - Economics - Introduction

Question

Define Implicit and explicit cost??

Shruti Mishra · Accepted Answer

Dear Student,
Explicit cost refers to the expenditures incurred
or payments made by a firm to various factors of production and
also non-factors of production These costs are recorded in the
books of account as they deal with the
expenditure incurred on the tangible items These costs are also
called as ‘out of the pocket expenses’ For example,
payments in the form of wages for labour, rent for
building
Implicit
cost,on the other hand,refers to the opportunity cost of
using the firm’s own resources These costs are not recorded
in the books of account as they deal with the expenditure incurred
on the intangible items These costs are also called ‘economic
cost’ For example, imputed value of the services of the owner
of the firm, imputed rent of the owner occupied building

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