ECO105Y1 Chapter Notes - Chapter 7: Demand Curve, Invisible Hand, Opportunity Cost
Document Summary
Depreciation the decrease in value of equipment over time because of wear and tear and because it becomes obsolete. Business must spread the cost out over the lifetime of long-lasting equipment (e. g. equipment that worth 000 divided by four years) Obvious costs (explicit costs) costs a business pays directly. Easy to sense the payment of the cost. Accountants include depreciation as part of obvious costs. Accounting profits revenue minus obvious costs. Implicit costs hidden opportunity costs of what business owner could earn else where with time and money invested. Time: giving up the best alternative use of the time (working for a boss) Risky business: a important question for calculating money"s opportunity cost is what expected return would it take for you to go for the risky business investment. Expected more to compensate for the risk of the business investment.
