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Economic Profit (or Loss)
What does it mean?
The difference between the revenue received from the sale of an output and the opportunity cost of the inputs used.
In Other Words...
Don't confuse this with "accounting profit," which is what most people generally mean when they refer to profit.
The main difference is that the cost component of economic profit is the opportunity cost of the inputs. That is, the best alternative return from these inputs if they hadn't been committed to the creation of the output. As a result, you can have a significant accounting profit with little to no economic profit.
Related Links
Economics Basics Tutorial - Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
Related Terms
Economics | Economies of Scale | Net Income | Profit
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