FINANCIAL TOOLS
Economic Profit Calculator
Calculate your economic profit by subtracting both explicit and implicit costs from revenue.
What is the Economic Profit Calculator & How does it work?
Economic profit is a measure of profitability that takes into account all costs, including both explicit (direct) and implicit (opportunity) costs. Explicit costs are direct out-of-pocket expenses like wages or rent, while implicit costs represent the opportunity cost of using resources that could have been used elsewhere.
To calculate economic profit, subtract the total costs (explicit plus implicit) from the total revenue. This gives you a clearer picture of the true profitability of your business by considering all the resources used in production.
To calculate economic profit, subtract the total costs (explicit plus implicit) from the total revenue. This gives you a clearer picture of the true profitability of your business by considering all the resources used in production.
Economic Profit = Revenue – (Explicit Costs + Implicit Costs)
Revenue = Total income from sales
Explicit Costs = Direct out-of-pocket expenses
Implicit Costs = Opportunity costs of using resources
Explicit Costs = Direct out-of-pocket expenses
Implicit Costs = Opportunity costs of using resources
Parameters
Economic Profit—
Frequently Asked Questions
What is economic profit?
Economic profit is a measure of profitability that includes all costs, both direct (explicit) and opportunity (implicit).
How do I calculate economic profit?
Subtract the total costs, including explicit and implicit, from your total revenue.
What are explicit costs in economics?
Explicit costs are direct out-of-pocket expenses like wages or rent.
Can you explain what implicit costs are?
Implicit costs represent the opportunity cost of using resources that could have been used elsewhere.
Why is economic profit important for a business?
Economic profit provides a clearer picture of true profitability by considering all resource costs.
How does economic profit differ from accounting profit?
Accounting profit only considers explicit costs, while economic profit includes both explicit and implicit costs.
Can I use this calculator for personal finances?
This calculator is designed specifically for business purposes. For personal finances, consider using a different tool.
Results are for informational purposes only and do not constitute professional advice.