Imputed Cost

When you think about a cost, you probably think about spending money. You write a check, you get a good or service. That system represents the usual way things go.

That normal way of incurring a cost has a technical name. It's known as an explicit cost.

Another potential cost is known as the imputed cost, sometimes called the implicit cost. It's the cost paid by using something that a company or individual already has. It represents the opportunity cost of using something you have on hand.

You're babysitting your niece. She wants to play in the kiddie pool you have in your backyard. However, you haven't paid your water bill in a few months, and they turned off your water service. However, you have a few cases of bottled water in the basement (a remnant of your disaster planning phase).

So you fill the backyard pool with bottle after bottle of water from your basement. It doesn't require any cash on your part (there's no explicit cost). You had the water already.

However, there's an imputed cost. You no longer have the bottled water in your basement. To replace it, you'll have to go out and buy more. Also, if the apocalypse comes before you can get to CostCo, you might die of dehydration. Another (less quantifiable) imputed cost.