Economic Costs (Essay Sample)

Economic Costs
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Economic Costs
Question: Define and distinguish various economic costs (implicit, explicit, fixed, and variable costs)
The current economic topic chosen is economic cost. The various economic costs include implicit, explicit, variable, and fixed costs. The article "A Term Paper Of Microeconomics On The Theory Of Cost, Cost Addition And Cost Leadership Approach, Application Of Production And Marketing Cost In Agriculture" by Upadhyaya and Gyawali (2020) provides enough information that is assistive in defining and explaining each of the economic concepts and how they are related to the course concepts.
The article, whose objective is to study the theories associated with economic costs defines what costs are in relation to accounting and proceeds to define and explain the various types of costs. It further highlights the various types of costs and how they are practically applied with respect to production and marketing. A monetary valuation of the effort, resources, materials, utilities and time consumed in the process of producing and delivering goods and services is referred to as an economic cost (Upadhyaya and Gyawali, 2020). It also includes the opportunities forgone and the risks when producing and delivering goods and services.
The article explores the economic theory of costs. The types of costs explored include explicit and implicit costs, as well as variable and fixed costs. The implicit economic costs, which are sometimes referred to as the imputed costs are usually the costs of choosing to utilize the resources that the firm already owns and which could have been used differently. They are resources that form non-expenditure costs which are mostly self-employed and self-owned resources. An example is the salary of a person who decides to work on his own firm and refuse to work for someone else. Explicit costs, on the other hand refer to costs incurred by the firm to attract nonowners. For example, providing competitive salaries and wages for its employees.
Further, the article explains that variable costs are subject to change in the firm through the influence of the level of production and amount of sales of the firm. Such costs usually rise whenever there is an increase in the production and sales of the company, and they decrease when there is decreasing productivity. Variable costs may include the cost of labor, the cost of raw materials and commissions. Fixed costs as explained remain unchanged in the production process. They do not exhibit any change with any increasing or decreasing number of goods and services being produced and sold. They include salaries, rent, direct labor, and taxes. For a firm, variable, fixed, implicit, and explicit costs are essential in determining and estimating the cost of production to predict the profit.
The article is related to the course concept in how it addresses economic costs and how these costs affect the running of a firm. In chapter one, the course materials define what economics is. It also expounds on the concepts of scarcity, demand and opportunity cost. This relates to the article since it explains how such costs are likely to affect and influence the production and marketing of goods and services. The variable costs are subject to change when demand and supply changes. In periods of scarcity of raw materials, for instance, the firm is more likely to make a low profit forcing it to reduce the salaries of the wo