ECON 103 Study Guide - Comprehensive Final Exam Guide - Compact Cassette, Megabyte, Magnetic Resonance Imaging
Document Summary
So far, we have learned that people take advantage of opportunities to make themselves better off. How do people decide what will make them better off: opportunity costs and decisions. The real cost of something is what you give up to get it. Opportunity costs consist of: (i) explicit costs (monetary) = costs that require payment. E. g. tuition, wages, rent (ii) implicit costs (non-monetary) = costs that are values foregone but with no actual payment. Income given up when you take time off from work. Time away from family when you go to university. If you have your own business, you need to consider explicit and implicit cost because explicit cost is the other thing you could be doing so you could have a business or another job. Accounting profit accountant only considers explicit costs. Businesses also have to consider explicit and implicit costs when they calculate their profit.
