Implicit Cost in Entrepreneurship

Implicit cost is a cost that is not incurred directly but is still a cost that needs to be considered while calculating the profitability of a business. In entrepreneurship, implicit cost is the cost of resources owned and employed by the entrepreneur himself in his business. Let's understand this concept in detail.

Definition

Implicit cost is an opportunity cost of using the resources owned by the entrepreneur himself in his business. These resources include the entrepreneur's time, skills, and knowledge.

Examples

- The salary that an entrepreneur could have earned if he had taken up a job instead of starting his own business.
- The interest that an entrepreneur could have earned by investing his own money in a safe investment option.
- The cost of education and training that an entrepreneur could have incurred to enhance his skills and knowledge.

Significance

Implicit cost is an important concept in entrepreneurship as it helps in calculating the true cost of running a business. It is not only the explicit cost that needs to be considered while calculating the profitability of a business, but implicit cost also plays a significant role.

Conclusion

In conclusion, implicit cost is the cost of resources owned and employed by the entrepreneur himself in his business. It is an opportunity cost that needs to be considered while calculating the profitability of a business. By taking into account the implicit cost, an entrepreneur can make informed decisions and improve the overall profitability of his business.

Because the entrepreneur is considered as internal source of production..... and hence it is implicit type.... Making it as internal..... And is not directly done.....