I'm a Managerial Economics student and my Professor is Dr. Gotwalt @ Purdue University...This is an awesome video and user friendly. When I started this class, I was so nervous but Dr. Gotwalt has provided us with tools such as this video link and I feel a bit at ease and comfortable with the class...Thank you for sharing...Sir....#Nice
Another thing that has to be considered is the long affects of both of these .. in year 4 of 5 of the restaurant, the accounting profit ur making could be something like 400000, which will most likely be greater than the salary a doctor would get, so it all depends :) .. good video though
thanks for the help man I've been struggling with economic in university because it's really new to me and my current professor is a very confusing lecturer I got a midterm coming up and this clears up a lot things for me
So basically, the formula for economic profit is, Revenue - explicit cost - implicit cost? Correct me if I'm wrong 🙁 I need to report this topic and I am still confused with their formulas, thank you in advance ☺️
hehe the good old days! where have you been professor why arent you running things! ive calculated that other people have calculated my opportunity cost to be about $1, judging by how things are going 😆 mannn it is good to watch your vids again.
It is a great video. I have a question : for the implicit opportunity costs why do you use the full amount of wages foregone instead of the difference between the wages foregone and the accounting profit of 50000$. my point being that the restaurant owner could not have been a doctor and a business owner at the same time. so what he is really missing on is not 150000$ since he is making 50K with the restaurant. Isn't he missing on 100000$ instead ?
blackorisha Hi blackorisha- good question, the only thing is that you actually answered your own question- several times!- within your own post :) "why do you use the full amount of wages foregone instead of the difference between the wages foregone and the accounting profit of $50,000?" - This is exactly the correct thing to do, so you're right about that. But in the video, he actually does do this- if you notice, he subtracts out $150k in wages foregone, yes, but that's not the final calculation- he actually takes the _difference between this and the $50k he made running the restaurant_ and winds up with -$100k as the final answer - emphasis added on the difference part b/c that's actually exactly what you were asking about in your post :) And if that wasn't quite clear (I'm not the best at explaining things), this also illustrates it pretty well: "Isn't he missing on 100000$ instead ?" -- if you look at the bottom number, on the right hand side, you'll see that is indeed exactly what he ended up at: -$100k - hope that helps!
I have a question in the case of the economic profit one supposes that one has two work? in the sense of giving up one to prioritize the other and the lost wages are used to calculate our profit?
me watching at double speed because it's still easy to understand and takes half the time lol Edit: just realized he made this vid 11 years ago, when I was 5 🤣
This generally works, but only in simple cases. Imagine you had 5 business opportunities which don't consume your whole time during the day, and can't be extended to a full day. You can't just add and subtract this time. Money is just a measurement of value. Value is productivity*time. Productivity is a relatively constant value, so time is what you've got to measure. Calculating the hourly profit will get you to operational research, which is what you want in complex, real life situations.
Mr. Khan what Are from your point of view independent variables that explain the profitability variance? For me they Are moral, intelektuall, social, physical, and financial capital and just in sucu order!
if your implicit costs were more than one option, say for example you could have been earning 150,000 by being a doctor but you could also have been earning 100,000 by being a runway model, would the total implicit costs be the highest valued opportunity cost only? thanks for the great videos!
When calculating economic profits, and there are two different employment alternatives - do you calculate two different economic profits, based on the different wages foregone for each employment alternative?
Whoa! Watch out everybody, this guy's from a Commonwealth country and knows what's up! Far be it from us to challenge him with the fact that "labor" is the proper spelling in American English!
he forgot to add the utilities to the expense list gas bill, electricity water and so on in that case he won't make any profit , however with that pointed out this is a good generalization in basic economics
+Marissa Johnson The difference is that labor expenditures are paid to employees. This doesnt include the employer or owner of the business. Profit is his income. If this owner is able to run another business, that earns him more income, then not exploiting the other business are his economic costs. In the given example he loses 100k income from running a restaurant relative to being a doctor.
So if you have a limited resource - your time, which you have to divide across different sources of income, you need to measure the accounting profit from each hour you can provide, and then go straight to this: en wikipedia org/wiki/Operations_research
@RJForce I wasn't criticizing I was just making an observation ,I know its supposed to be just an example of sorts and if you'll recall correctly I did state that it was a good one at that so don't be so hypersensitive I wasn't trying to be insulting
Economic Profit is just a different way of thinking about it. Accounting profit is what you use to report your payments to the government, for instance. In this case it means the business is surviving! Economic takes into account the sacrifices people made for that business to run and the Accounting focuses on the business alone. Economic is a bit more personal. Maybe the guy hated being a doctor, or his business will make more money every year.
What I'm not understanding is how his revenue is 500,000 and has those list of expenses while he is working as a doctor and making 150,000/yr instead of running the restaurant. I'll rephrase that, If he is a doctor then how does he even have that list of expenses. It wouldn't even be existent. Wouldn't that be like me saying that I have an economic profit of negative 92.5 billion dollars because I didn't create microsoft?
I think he is looking at the two choices if he opens the restraunt he will make 50000 In profit but if he is a doctor to open tht same restraunt he would give up his pay ... calculating the difference between the restraunt profit nd pay economically speaking he will loose 100000
Nd yes I think u are right about the Microsoft if u had the option and resources to create microsoft... u learned something in the 8 mins of video but could have learned something else with tht time economics is about using scarce resources to make choices
@mnljh711986 adding to what RJForce said, utilities are an explicit cost, which generate "receipts" and are part of your accounting profit, which only cares about the receipts, no implicit costs.
If I need a kindergarten education then I'll ask that teacher ... when I need a real business idea I refer to @experts ... good luck with this video as it isn't #USEFUL at all
Your 8 minute video made more sense than an hour in my text book did! Thank you
yes that's true
now everything makes sense. I'm having exam tomorrow, pray for me n tqvm for this!
Thank you! I got an A- and that's good enough for me :)
Study don’t pray. Praying has never stopped a natural disaster, a bullet or cancer. You’d think people would question their beliefs ...
تخرجت ؟
@@hb7of9 Maybe they didn't pray hard enough
where you at today
Not All heroes wear capes
I'm a Managerial Economics student and my Professor is Dr. Gotwalt @ Purdue University...This is an awesome video and user friendly. When I started this class, I was so nervous but Dr. Gotwalt has provided us with tools such as this video link and I feel a bit at ease and comfortable with the class...Thank you for sharing...Sir....#Nice
"Son, you have two choices: engineer, or doctor."
"But my dream is to own a restaurant, father!"
"Honey, pull up Khan Academy."
i guess I'm quite randomly asking but do anyone know a good place to stream newly released series online?
@Soren Kaden i use FlixZone. You can find it by googling :)
@Atlas Sutton Yea, have been using Flixzone for since april myself =)
@Atlas Sutton thank you, I signed up and it seems like a nice service :) Appreciate it!!
@Soren Kaden no problem =)
Another thing that has to be considered is the long affects of both of these .. in year 4 of 5 of the restaurant, the accounting profit ur making could be something like 400000, which will most likely be greater than the salary a doctor would get, so it all depends :) .. good video though
I just watched some of his videos on Organic Chemistry, i don't understand how this guy knows so much stuff.
I was confused about the economic profits of a firm. Now I get it. Thanks again. I love education videos....love them.
Oh my god i can't believe this guy just explained the whole topic for 8 minutes and I completely understand it. Thank you very much
Wow this is so clear! Thank you so much!
Great video! Simple terms used which helped me understand the subject. Thank you!
thanks for the help man I've been struggling with economic in university because it's really new to me and my current professor is a very confusing lecturer I got a midterm coming up and this clears up a lot things for me
So basically, the formula for economic profit is, Revenue - explicit cost - implicit cost? Correct me if I'm wrong 🙁 I need to report this topic and I am still confused with their formulas, thank you in advance ☺️
hehe the good old days! where have you been professor why arent you running things! ive calculated that other people have calculated my opportunity cost to be about $1, judging by how things are going 😆 mannn it is good to watch your vids again.
my god wow ive been trying to look in to sopa and came out with nothing and u helped so much
NO MORE SOPA
Why didn't I have this guy for my Economy Class in High School... I might have actually paid attention...
This video was way better than today’s 1 hour lecture🖤
ya exactly
i have an exam tomorrow and was confuse but after i watched this i understand it now
It is a great video. I have a question : for the implicit opportunity costs why do you use the full amount of wages foregone instead of the difference between the wages foregone and the accounting profit of 50000$. my point being that the restaurant owner could not have been a doctor and a business owner at the same time. so what he is really missing on is not 150000$ since he is making 50K with the restaurant. Isn't he missing on 100000$ instead ?
blackorisha Hi blackorisha- good question, the only thing is that you actually answered your own question- several times!- within your own post :)
"why do you use the full amount of wages foregone instead of the difference between the wages foregone and the accounting profit of $50,000?" - This is exactly the correct thing to do, so you're right about that. But in the video, he actually does do this- if you notice, he subtracts out $150k in wages foregone, yes, but that's not the final calculation- he actually takes
the _difference between this and the $50k he made running the restaurant_ and winds up with -$100k as the final answer - emphasis added on the difference part b/c that's actually exactly what you were asking about in your post :) And if that wasn't quite clear (I'm not the best at explaining things), this also illustrates it pretty well:
"Isn't he missing on 100000$ instead ?" -- if you look at the bottom number, on the right hand side, you'll see that is indeed exactly what he ended up at: -$100k - hope that helps!
I have a question in the case of the economic profit one supposes that one has two work? in the sense of giving up one to prioritize the other and the lost wages are used to calculate our profit?
just what i was looking for. Short and precise
me watching at double speed because it's still easy to understand and takes half the time lol
Edit: just realized he made this vid 11 years ago, when I was 5 🤣
What if you owned the place and it was your first period would you expense the price paid for the place or would it not be calculated into profit
Sir you are an outstanding personality
Really it helps me a lot .thanku so much sir
This generally works, but only in simple cases. Imagine you had 5 business opportunities which don't consume your whole time during the day, and can't be extended to a full day. You can't just add and subtract this time. Money is just a measurement of value. Value is productivity*time. Productivity is a relatively constant value, so time is what you've got to measure. Calculating the hourly profit will get you to operational research, which is what you want in complex, real life situations.
Mr. Khan what Are from your point of view independent variables that explain the profitability variance? For me they Are moral, intelektuall, social, physical, and financial capital and just in sucu order!
if your implicit costs were more than one option, say for example you could have been earning 150,000 by being a doctor but you could also have been earning 100,000 by being a runway model, would the total implicit costs be the highest valued opportunity cost only? thanks for the great videos!
You are the best hands down.
Thanks so much for these video. I'm not an economist and that why this Is veeeery useful for me. thanks again.
Is the basic difference- Economic profit also calculates ( includes) implicit cost?
It also includes opportunity costs
Thanks so much for the explanation what is the program you are using to explain this to us?
thanks a lot for this quality of teaching
Thank you for nice explain
thank you! great class
You explained it well than my teacher did
This makes sense.... keep it up.
Does zero economic profit equal the industry profit or the interest on government bonds? or other thing ?
Thank you for making it so simple ...
When calculating economic profits, and there are two different employment alternatives - do you calculate two different economic profits, based on the different wages foregone for each employment alternative?
Yes
Thanks for the help! Economics is very theoretical and your examples help a lot with putting them in to a reality setting.
I agree, he really showed how Microeconomics related to financial accounting.
good video. Thank you Sir
Super helpful
I couldn't thank you enough for this information.
just want to say thank you!!!!!!!!!!!!!!
Thank You
Taught the concept deliciously well ;-)
Thank you sir❤
Thanks, cheers...
Thank you so much for your videos! Always very helpful.
which software do you use to write this and explain?
@khanacademy can you do video(s) on something like quantum mechanics/ particle physics. Profit for the Win
The explanation is so simple for me to understand! Thanks so much for this eye-opener.
Thank you sir
Your videos are awesomely informative in laman's terms. Kudos!
watching in 2024 ..... it helped me alot
Does marginal cost include implicit expenses?
Whoa! Watch out everybody, this guy's from a Commonwealth country and knows what's up! Far be it from us to challenge him with the fact that "labor" is the proper spelling in American English!
interesting stuff.
Got an Econ exam tomorrow. Pray for me.
Very helpful sir :)
It made me understand in just one time
good work
Thank you so much!
he forgot to add the utilities to the expense list gas bill, electricity water and so on in that case he won't make any profit , however with that pointed out this is a good generalization in basic economics
great job, very clear!
what is wages forgone or forgone interest?
Accounting profit is net income or net loss
thanks!
im sorry but he didnt half 5 hours to go through everything that is related to either accounting profit or economic profit
suppose, i am unemployed person and i have started a business .so now my implicit cost is 0....right?
Video views just jumped 8k from the last video...
they are both the same except wages forgone-what is that? how is that different than labor?
+Marissa Johnson
The difference is that labor expenditures are paid to employees. This doesnt include the employer or owner of the business. Profit is his income. If this owner is able to run another business, that earns him more income, then not exploiting the other business are his economic costs. In the given example he loses 100k income from running a restaurant relative to being a doctor.
So if you have a limited resource - your time, which you have to divide across different sources of income, you need to measure the accounting profit from each hour you can provide, and then go straight to this: en wikipedia org/wiki/Operations_research
Actually I could not understand why wages are implicit cost. They are obviously explicit cost.
@RJForce I wasn't criticizing I was just making an observation ,I know its supposed to be just an example of sorts and if you'll recall correctly I did state that it was a good one at that so don't be so hypersensitive I wasn't trying to be insulting
Economic Profit is just a different way of thinking about it. Accounting profit is what you use to report your payments to the government, for instance. In this case it means the business is surviving! Economic takes into account the sacrifices people made for that business to run and the Accounting focuses on the business alone. Economic is a bit more personal. Maybe the guy hated being a doctor, or his business will make more money every year.
Are you the guy who does the voice for the video Llamas with Hats? Because you sound uncanningly like Carl
200,000 for Rent? give some real numbers man
whats a cost principle?
What I'm not understanding is how his revenue is 500,000 and has those list of expenses while he is working as a doctor and making 150,000/yr instead of running the restaurant. I'll rephrase that, If he is a doctor then how does he even have that list of expenses. It wouldn't even be existent. Wouldn't that be like me saying that I have an economic profit of negative 92.5 billion dollars because I didn't create microsoft?
I think he is looking at the two choices if he opens the restraunt he will make 50000 In profit but if he is a doctor to open tht same restraunt he would give up his pay ... calculating the difference between the restraunt profit nd pay economically speaking he will loose 100000
Nd yes I think u are right about the Microsoft if u had the option and resources to create microsoft... u learned something in the 8 mins of video but could have learned something else with tht time economics is about using scarce resources to make choices
i love this :D
@RedEagle575 youtube is sometimes confusing on the replies I'm the one that mentioned the utilities not RJForce
Savior
@vickiormindyb sorry, it's something I have a profound interest in
Thanks a million tonnzzz
you've misspelled "labour"
@mnljh711986 adding to what RJForce said, utilities are an explicit cost, which generate "receipts" and are part of your accounting profit, which only cares about the receipts, no implicit costs.
1st is liken
Mr
@89savant haha this made me smile :)
Why there isn't an Arabic translation😕😕😕😕😕😕
I've done it. :[
@billyzelsnack So you could be better off elsewhere, why is that making you happy?
@billyzelsnack Same for me, money will not make me happy as much as satisfaction! thumbs up~
am i the only one who didnt understand the difference?
1 dislike ha
why didn't you just keep your job as a doctor?
If I need a kindergarten education then I'll ask that teacher ... when I need a real business idea I refer to @experts ... good luck with this video as it isn't #USEFUL at all
Really clear, thanks
Excellent... Thanks alot Sir You made me understood in the first place.. :)