The brand of economics that looks at the behaviour of individuals and businesses. In other words, it examines how consumers and businesses react to changes in variables. For example, how do consumers react to price changes and how does quality affect this decision making.

Explicit and Implicit Costs Definition

Explicit and Implicit Costs: Definition & Examples

An explicit cost is the clearly stated costs that a business incurs. For example, employee wages, inputs, utility bills, and rent, among others. These are the costs which are stated on the businesses balance sheet.

By contrast, implicit costs are those which occur, but are not seen. In other words, these are the costs that are not directly linked to an expenditure. For example, a factory may close down for the day in order for its machines to be serviced.