What is the Difference between an implicit cost and explicit cost?

Explicit costs are direct, out-of-pocket expenses that a business incurs, such as wages, rent, and materials. In contrast, implicit costs represent the opportunity costs associated with a business decision, reflecting the potential income lost from alternative uses of resources, such as time or capital. While explicit costs are easily identifiable and quantifiable, implicit costs are more subjective and often harder to measure. Both types of costs are essential for assessing a business's overall profitability and economic performance.