12. Briefly explain the concept of the cost function.
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Cost function refers to the functional relationship between cost and output. It studies the behaviour of cost at different levels of output, when technology is assumed to be constant. It can be expressed as under: C=f(Q) Here, C= Cost of production; and Q.= Quantum of output.
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The functional relationship between the cost of production and the output is called the cost function. It is expressed as
C = f(Qx)
Where,
C = Cost of production
Qx = Units of output x produced
In other words, the output-cost relationship for a firm is depicted by the cost function.
The cost function depicts the least cost combination of inputs associated with different output levels.
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