What is the difference between explicit cost and implicit cost?

Explicit costs refer to direct, out-of-pocket expenses that a business incurs, such as wages, rent, and materials. In contrast, implicit costs represent the opportunity costs of using resources in one way rather than another, such as the income the owner could have earned by working elsewhere or the potential revenue from an alternative investment. While explicit costs are easily quantifiable, implicit costs are more subjective and reflect the value of foregone alternatives. Together, they help assess the true economic cost of a decision.