Episode 21: Accounting Costs vs. Economic Costs

In this segment, I make the distinction between accounting costs/profits and economic costs/profits.

Category:

Education

Tags:

• economics
• costs
• profits

[9845023557]

how can fixed cost will be overhead costs for economist and the same fixed cost refers as indirect cost to accountant???plz explain

[mjmfoodie]

@9845023557 There must be some confusion - the overhead costs apply in either case, because those are direct costs; the indirect (or opportunity cost) applies for the economist.

[mjmfoodie]

Heaven forbid -- any economist will tell you that if you want to look at the FULL cost, then the economic cost is the way to go. It's not always the way decisions are made in real life (look at government expenditures - I'm sure they look only at the direct dollar figure on building a bridge or building a new weapon, but are they looking at the other things that could have been done with those dollars . . . ?), because not everyone thinks about ALL the costs and benefits, direct and indirect.

[macdean]

youtube is better than many of my professors

[nando0204]

Thank you so much!

[klick4x]

good explanation !

[cmuto9]

I'd wanna farm

[critocracy]

thanks!! You saved my economics grade :)

[GabaJaba]

question...does it depend on the situation or is the accounting profit the more realistic way to calculate profit? and if so, is the economic profit a wrong way to calculate profit?

[landwarrior82]

nice drawings

[ena1490]

thanks! very clear, very helpful!