Types Of Economic Cost

There are 8 main types of cost in economics.

TRENDING TOPICS… Plateau Attacks: 327 Killed, 14,968 Displaced By Suspected Fulani Herdsmen — As Contained In Irigwe Land Report

I Lost Control, After We Arrested Aguiyi Ironsi – Lt-General T.Y. Danjuma

EDUCATIVE | Why Do You Think That The Study Of History Is Important Today In Nigeria

they are as follows: [1]Real Cost, [2]Opportunity Cost, [3]Monetary Cost, [4]Production Cost, [5]Selling Cost, [6]Fixed Cost, [7]Variable Cost, [8]Marginal Cost

Real Cost: Refers to the actual input of resources in making a produced good or service, this include labour, raw materials, transportation.

Opportunity Cost: i.e Opportunity forgone; that is the loss of a potential benefit when other alternative is chosen. Example Mr John a firm owner has a dire need of a private car and at the same time needing a delivery truck for his goods and services, and he opted for the delivery truck and purchased it instead..   The opportunity cost of the truck purchased is the private car not purchased.

Monetary Cost:  Is simply the monetary expenses in a production, which includes payments for several things such as labour, raw materials, utilities, rents, transports, e.t.c.

Production Cost: Is the total amount resources and money spent in the production of goods, it includes both Fixed, Variable and Marginal cost.

Selling Cost: Are those expenses incurred in putting up measures to market a product, Example the cost of marketing, advertisement, promotion, e.t.c. But in a perfect market  where the buyers and sellers are fully aware of the qualities, prices and dynamics of the goods and services, selling cost will have no place in.

Fixed Cost: i.e overhead cost: these are those cost which a firm must spend first before starting, things like building of warehouses, buying and installing machinery, rent, falls under fixed cost, they do not change in a short run, and unlike variable cost do not change with the level of production output.

Variable Cost: variable cost are costs which changes as the level of production output changes, they increase and decrease with the level of production output, they are costs such as: direct labor cost, cost of raw material, utility cost, e.t.c.

Marginal Cost: Are simply the costs of producing additional units goods and services, after the main production,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.