Final answer:
A cost driver is an activity that incurs costs, encompassing not only money but also time and effort. These could be explicit costs like wages or rent, or implicit costs like the opportunity cost of using personal assets for business.
Step-by-step explanation:
A cost driver is a task, effort, or other usage of a resource that causes a particular cost. In the context of political sciences as well as business and economics, costs may encompass not only monetary expenses but also the use of resources to obtain benefits, which are referred to as transaction costs.
These can include time, effort, and monetary outlay. In economics, we can also refer to costs as either explicit costs which are direct, out-of-pocket payments, or implicit costs representing the opportunity costs of using owned resources without direct payment.
Examples of implicit costs include unpaid work time or the use of personal property for business purposes. Understanding these concepts is crucial when discussing productive efficiency, sunk costs, and the utility derived from consuming goods and services.