explicit cost


Explicit Cost

A direct expense that a business incurs in conducting an activity. Examples of explicit costs include salaries, wages, materials, etc. An explicit cost can be recurring, or it can be a one-off expense. Likewise, it can be predictable, like the rent, or it can vary from time to time, like the electric bill. Less commonly, an explicit cost is called an outlay cost. See also: Implicit cost.

explicit cost

a payment made by a firm for the use of FACTOR INPUTS (labour, capital) not owned by the firm. Unlike IMPLICIT COSTS (which represent payments for the use of factor inputs owned by the firm itself), explicit costs involve the firm in purchasing inputs from outside FACTOR MARKETS.