Question
State the distinction between explicit cost and implicit cost. Give an example of each.
| S No. | Explicit Cost | Basis | Implicit Cost |
| 1. | It refers to the actual money expenditure of a firm on purchasing goods or hiring factor services and non-factor inputs (like raw material, electricity, fuel etc.) | Meaning | Implicit cost is the imputed or estimated value of inputs supplied by the owner of the firm himself. |
| 2. | It is explicitly shown in the firm's book of accounts and is I thus. called accounting cost. | Account Book | It does not enter in the firm's book of accounts. |
| 3. | It is payment concept. | Concept | It is a receipt concept, i.e., the payments are received by producer for self-supplied services. |
| 4. | Wages, rent, interest, insurance, etc. | Examples | Wages of self-supplied labour, rent for self-owned premises, etc. |
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