What is Cost?

Cost refers to the total expenditure made on inputs or resources that are used for the production of final goods or services. The resources used by a firm are limited in nature and thus require efficient allocation to maximise the firm’s profit. The cost or economic cost of a firm consists of all the expenses it faces, can manage, and are beyond its control.

For example, cost of labor, capital, and raw materials. Besides other resources, a firm may also use those resources whose expenses are not that clear but are still essential for the firm.