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Cost Benefit Analysis

This document discusses cost-benefit analysis and its types. Cost-benefit analysis is a tool that compares the costs and benefits of potential projects to choose those with the greatest net benefit. It considers economic choice and aims to assist decision makers. There are different types of costs and benefits, including private costs versus benefits, external costs versus benefits, and social costs versus benefits.

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DJianne Sulangon-Guray
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54 views6 pages

Cost Benefit Analysis

This document discusses cost-benefit analysis and its types. Cost-benefit analysis is a tool that compares the costs and benefits of potential projects to choose those with the greatest net benefit. It considers economic choice and aims to assist decision makers. There are different types of costs and benefits, including private costs versus benefits, external costs versus benefits, and social costs versus benefits.

Uploaded by

DJianne Sulangon-Guray
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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COST-BENEFIT ANALYSIS

AND ITS TYPE


COST-BENEFIT ANALYSIS

IS CONCERNED WITH ECONOMIC CHOICE AND ENDEAVORS


TO ASSISTS DECISION MAKERS IN MAKING CHOICES
CONCERNING SCARCE RESOURCES.

IS A COMMON BUSINESS PLANNING TOOL THAT INVOLVES


COMPARING THE LIKELY COSTS AND BENEFITS OF
POTENTIAL PROJECTS TO CHOOSE THOSE THAT OFFER
THE GREATEST NET BENEFIT.
TYPES OF COSTS AND BENEFITS
Private Cost vis-à-vis Private Benefit
Private cost is any negative effect on an
organization resulting from the implementation of
the project while any positive effect is private
benefit.

Private Cost is the cost to the producers


Private Benefit is the profit the producers get in the
production process
External Cost vis-à-vis External Benefit

External Cost occurs when producing or


consuming good or service that imposes a cost to
other party.

External Benefit occurs when producing or


consuming a good or service imposes a benefit to
a third party.
Social Cost vis-à-vis Social Benefit
Social Cost is the sum of the private cost and
external cost.
Social Benefit private benefits gained by the
individuals directly involved in a transaction
together with the external benefits gained by the
third parties not directly involved in the
transaction.

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