Question

what is cost in economics

Answer 1

Economic cost which is also known as opportunity cost is the value you give up when you choose one economic activity over the next best economic activity. Such economic activities might include buying goods or services or staring a business. You can calculate the economic cost by finding the difference between the chosen economic activity and the alternative economic activity. The classic example of economic cost looks at guns and butter, examining defense spending versus social spending. In order to produce a certain amount of guns, you have to give up producing a certain amount of butter, and the difference in value is the economic cost for producing the guns. Keep in mind that economic costs are different than accounting costs; accounting costs refers strictly to monetary value, while economic cost includes monetary value as well as other values, like resources and satisfaction.

Economic costs are not only the costs of producing a good, it also includes the opportunities forgone by producing this product.

Example: If a firm is producing Computers then the accounting costs are the costs incurred for producing the computers. Economic costs include the cost of producing the computers as well as opportunity cost. Suppose, If this firm could lease its office and the plant for say $100,000 then that is the opportunity cost.

Answer 2

The amount of money something is worth.