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Outline - -Accounting – Total Cost Only Explicit Cost o...

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Chapter 2 Economics Defined: problem of scarce resources and unlimited human wants. - Not enough resources available to produce goods and services to satisfy the unlimited wants of people force people to make choices. Micro and Macro Economics Microeconomics examines the choices of individual decision makers, primarily households and firms. - Supply and Demand is a tool economists use to describe the operation of competitive markets. - Macroeconomics is the study of the economy as a whole. - Topics include the nature and causes of inflation and unemployment. - Affects issues in the sport industry. Economic Profit vs. Accounting Profit - Profit = Total Revenue – Total Cost (Same Definition for both) - Total Cost means something different for each - Economic – Total Cost: All of the Opportunity Cost of Production
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Unformatted text preview: -Accounting – Total Cost: Only Explicit Cost o Accounting Profit = total revenue – explicit costs (payments for factors of production) o Economic Profit = total revenue –explicit costs –implicit costs (opportunity cost of the resources supplied by the firm’s owners) Opportunity Cost: the value of the best alternative given up when a decision is made-Includes explicit cost, which involves expenditures of money, and implicit costs, which refer to non-monetary expenditures.-Example: Paying a free agent a huge amount of salary Implicit Cost: the value of the personal resources the owners of a firm make available (labor and capital) Normal Profit = Accounting Profit – Economic Profit Normal = Implicit...
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