What is economic profit?
Economic profit is the method of calculating profit including both explicit and implicit costs.
Where accounting profit is used primarily for tax purposes, economic profit is used to determine the current value.
Economic Profit = Revenue – Explicit Costs – Implicit Costs
Sources and more resources
- Wikipedia – Profit (economics) – A description of profit in the economic sense.
- Khan Academy – Economic profit vs. accounting profit – Part of a larger course on microeconomics. This video details the differences between accounting and economic profit and how they are calculated.
- Investopedia – What is the difference between accounting and economic profit? – Another comparison of economic and accounting profit.
- jodiecongirl (YouTube) – Microeconomics practice problem – Accounting Profit versus Economic Profit – A video overviewing the difference between accounting and economic profit.