Question

Why are cost important in economics? Why don’t economist use the same cost data accountants use?

Answer 1

Costs are important in economics in determining the allocation of resources based on what firms are willing to pay, which in turn depends on how much consumers are willing to pay for the products produced by these resources. Costs reflect the market prices of the resources used in production, but also economic costs include the opportunity cost of using some resources that may not have an explicit market price. Economists argue that the cost of all resources should be considered when determining the real cost of productists are important because they are part of businesses which has to be analyzed under various theories of economics. Economic costs differ from accounting costs because accountants report costs on historical basis in their financial statements. Accountants use costs to determine the true picture of their assets in the company and to give an account of how much expenses have been incurred during a fiscal year.Accountants are necessarily obsessed with reporting what happened in the past. While economists are often concerned with the past, they are more often concerned with the future. Because of this, simple accounting data are often inadequate to carry out the work of economists.