Economic profit is the total revenue generated by a business minus total opportunity costs. It is a more theoretical way of looking at a company's profitability that differs from the standard accounting profit reflected on the company's income statement, which simply subtracts the cost of producing goods and services from total revenue.Know More
Accounting for profit ordinarily involves evaluating actual revenue that came into the business against actual expenses that were paid. Another way of looking at overall profitability is to assign a cost to the opportunities that the business couldn't capitalize on, known as the total opportunity cost. Lost opportunities include such things as the difference in a discount the company could have received on raw materials if it had the cash flow to buy in bulk and other business opportunities or adjustments that would have increased profitability under ideal circumstances.
Economic profit, also known as economic value added, is almost always lower than actual profit because it factors in scenarios that resulted in the business making less profit than it could have optimally made. Considering economic profit along with actual profit allows a company's stakeholders to evaluate the performance of the people running the business, since opportunity cost often reflects management decisions made to direct operations.Learn more about Economics
Gas is expensive because commodities traders bid up the price of gas contracts on the commodities futures markets with the intention of selling them for profit. Additionally, the price of gas is high due to the high prices of crude oil.Full Answer >
An economic map is a map that illustrates various economic activities or phenomena that take place in a particular area. This type of map features a variety of symbols and colors referring to particular economic activities.Full Answer >
An economic region is an area in which particular types of commerce take place based on administrative or geographical boundaries. These boundaries come in the form of state lines, international borders or natural geographic landmarks. Other factors, including the migration of labor, the consumer’s market and laws regarding trade, shape economic regions. There are several different types of economic regions, most notably large, small, urban and international.Full Answer >
Economic freedom refers to a condition in which a person living in a community, state or country has the right to purse economic opportunities. This condition is associated with capitalistic countries where individual opportunities to find work and make money are typically promoted by limited government restrictions.Full Answer >