Why Are Costs Important in Economics - Essay Example

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In the paper “Why Are Costs Important in Economics?” the author analyzes the costs which are related to resources that are scarce, productive and have different applications. The society combines a number of resources to develop a specific product while it forgoes all other alternative options…

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Subject: Business
Type: Essay
Level: Masters
Pages: 3 (750 words)
Downloads: 2

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Accountants, on the other hand, consider profits as the balance of revenue after deducting accounting costs (or explicit costs) only. For the economists, economic cost (explicit and implicit costs including normal profit to producer) reduced from total revenue is the economic profit (McConnell 2005 p.156). Changes in demand, supply and equilibrium occur due to fluctuations in customer income, tastes or changes in customer expectation or the changes in the price of related products. Changes in supply occur as a result of changes in the price of resources, taxes or technology.

These changes can have an effect on the equilibrium of price and quantity (McConnel).

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