Economic Profit vs. Accounting Profit

Watch this video about economic profit versus accounting profit. Make sure that you understand that in economics, there are indirect expenses to consider. An example of an indirect expense is the wage when a self-employed owner does not earn somewhere else because he/she puts all their time into running their business and gives up earning an income somewhere else. That indirect expense, or opportunity cost, should be taken into account for determining the economic profit from running that business as a self-employed person.

Source: Khan Academy
Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License.

Last modified: Wednesday, February 24, 2021, 5:07 PM