Finance Formulas / July 18, 2018 / Cecelia Weiss
Economic profit is a measurement of opportunity cost. Opportunity cost is the value of the trade-off when a decision is made. For example, an individual may consider returning to school to get a degree but in doing so, needs to quit his current job. The individual should consider not only the cost of tuition and books, but the income he forgoes by pursing a degree. This lost opportunity to make money, or opportunity cost, is the underlying purpose of calculating economic profit.
Loans can be confusing. Slick lenders quote different numbers that mean different things. They might include certain costs that you're likely to pay, or they might omit those costs in advertisements and brochures.
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