Let's say you expect a new business endeavor to generate $100,000 in year one, while it will only cost $80,000 to get started. Your accounting profit would be $20,000. However, in order to start the business, you would need to quit your full-time job and reduce to part-time hours, forgoing $50,000 in income in year one.
The economic loss to you would be negative $30,000 for the first year ($100,000 of revenue minus $80,000 of start-up costs minus $50,000 of lost income). You might decide to go ahead with this plan, though, if there are no other start-up costs after year one, your ongoing expenses significantly drop, and your revenue increases. The initial economic loss could become a long-term economic profit.
The same principle can be used in other ways when deciding how to spend or invest your money. Perhaps you have a choice between buying a new car with a warranty or a used car with no warranty. The new car has a higher up-front expense but lower maintenance expenses for a time, while the used car has a lower up-front purchase price but higher maintenance expenses. The same concept applies to buying or renting a home and investing money. Considering economic profit or loss can help you make better long-term financial decisions.