Question

You are going to sell fruits & vegetables at a local roadside market. List separately and discuss ALL the explicit AND implicit costs that might be involved in this business venture

Answer 1

Answer - In a business venture , the explicit costs are the costs which the owner incurs while borrowing the factors from outside. These are basically the hired resources.

Implicit cost are the costs which are incured by the owner itself. These are not hired and are notional in nature. Thus in the above given business venture -

Explicit cost will be the cost of the fruits and vegetables purchased from wholesale market in order to sell them roadside. The salary given to a helper which is hired from outside will be the explicit cost. The cost which would be incured for taking the electricity connection will be explicit.

The implicit cost will include the cost of wooden platform which was bought by owner from his own house. Implicit cost also called opportunity cost. Hence it will also include the salary , which owner would have good while working in some other's shop but which he is not doing now.