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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]
An explicit cost is a direct payment made to others in the course of running a business, such as wage, rent and materials, [1] as opposed to implicit costs, where no actual payment is made. [2] It is possible still to underestimate these costs, however: for example, pension contributions and other "perks" must be taken into account when ...
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])
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The explicit costs are the wages and materials needed to fund soldiers and required equipment, whilst an implicit cost would the lost output as resources are direct from civilian to military tasks. Opportunity cost at a government level example. Another example of opportunity cost at government level is the effects of the Covid-19 pandemic.
One example of how explicit and implicit memory works together is driving a car. “At once, we must remember the directions (explicit) of where we are headed while also remembering how to drive ...
The accurate measurement of each of these costs is necessary to facilitate decision management. For example, if the combination of explicit and implicit costs, which represent the realized cost of transacting, is greater than the opportunity cost of not transacting, it suggests that trades may have been executed too quickly.
Measures such as carbon taxes or emissions trading schemes put an explicit price on GHG emissions. [1] The sum of implicit and explicit carbon prices is referred to as the effective carbon price. [1] [3] [4] Considering both the implicit and explicit carbon prices can contribute to a better understanding of a country's progress on tackling ...