Cost
A cost is the value of the resources that are spent to accomplish an action.[1] The cost of an action is most often expressed in terms of money, but can also be thought of in terms of time spent on a project, 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 a less 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 unpredictive nature of implicit costs, it is difficult to account for the whole cost.[4]
Net Cost
The cost of an 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.
Opportunity cost
When making a decision, one must consider potential alternative plans, and choose which plan to follow through. The potential benefits of the alternatives which were not chosen are called the opportunity cost.
Various Costs
Here is a list of some costs which are commonly incurred:
- Fixed cost
- Variable cost
- Opportunity cost
- Marginal cost
- Total cost
- Avoidance cost
- Life-cycle cost
- Private cost
- Social cost
- Levelized cost of energy
- Explicit cost
For Further Reading
- Cost-benefit analysis
- Costs for a firm
- Externality
- Or explore a random page
References
- ↑ 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].
- ↑ 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.
- ↑ Dictionary of Economics" entry: 'explicit cost' published Routledge Press, 2013. Edited by Donald Rutherford Online version accessed [August 17th, 2017].
- ↑ Dictionary of Economics" entry: 'implicit cost' published Routledge Press, 2013. Edited by Donald Rutherford Online version accessed [August 17th, 2017].