In economics, "cost" has a broader meaning than just the price tag you see on a product. It goes beyond the direct monetary expenses and considers the true value of what you give up to obtain something.
Economic Cost vs. Accounting Cost:
Accounting cost: This is the traditional view, focusing on the explicit spending monry you make, like wages paid, raw materials bought, etc.
Economic cost: This takes a broader perspective, including opportunity cost, which is the value of the next best alternative you give up by choosing something else. For example, if you open a bakery instead of taking a high-paying job, your economic cost includes both the explicit expenses of running the bakery and the money you could have earned in the other job.
Key Types of Costs:
Why Cost Matters: