Cost

A cost is the value of resources that are used to achieve an end.[1] The cost of an action is most often expressed in terms of money but a cost can also be expressed in terms of materials used, information, capital, labour and a number of other ways.[2] Price focuses specifically on how much money is spent to achieve an end.

Implicit and Explicit Costs

There is an extensive list of costs that can be incurred. Some costs are concrete such as the price of a raw material for manufacturing or the price of gasoline at a gas station. Costs that are obvious are called explicit costs. Explicit costs are easy to quantify and account for (especially for firms).[3]

Other costs are less obvious and harder to determine such as the social cost, the effect of low employee morale or environmental costs. The value of less a obvious cost or implicit cost is determined by making assumptions to assign a value. Costs based on assumptions are not always exact, or easy to predict. Due to the predictive nature of implicit costs, it is difficult to account for the whole cost.[4]

Net Cost

The cost of a action is often balanced against the potential gains from the action, this is called the net cost. The determination of a net cost analysis should take into account all costs that could be incurred in order to make an accurate comparison with the potential benefits. Comparing the costs and potential benefits of an action is called a cost benefit analysis.


Various Costs

Here is a list of some costs which are commonly incurred:

See Also

References

  1. C. Park. "Cost." Oxford Dictionary of Environment and Conservation. [Online], Available: http://www.oxfordreference.com/view/10.1093/acref/9780198609957.001.0001/acref-9780198609957-e-1743?rskey=vDpGxK&result=1, 2012 [June 26, 2016].
  2. Verbruggen, A., W. Moomaw, J. Nyboer, 2011: Annex I: Glossary, Acronyms, Chemical Symbols and Prefixes. In IPCC Special Report on Renewable Energy Sources and Climate Change Mitigation [O. Edenhofer, R. Pichs- Madruga, Y. Sokona, K. Seyboth, P. Matschoss, S. Kadner, T. Zwickel, P. Eickemeier, G. Hansen, S. Schlömer, C. von Stechow (eds)], Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.
  3. Dictionary of Economics" entry: 'explicit cost' published Routledge Press, 2013. Edited by Donald Rutherford Online version accessed [August 17th, 2017].
  4. Dictionary of Economics" entry: 'implicit cost' published Routledge Press, 2013. Edited by Donald Rutherford Online version accessed [August 17th, 2017].

Authors and Editors

Lyndon G., Jason Donev