Cost

In economics, business, and accounting, a cost is a price paid as part of a commercial event or economic transaction. Several types of costs have been identified and labeled including:

opportunity costs
accounting costs
sunk costs
marginal cost
transaction costs
private costs
social costs
psychic costs
incremental costs
fixed costs
variable costs
average cost

Table of contents

1 Accounting and Opportunity costs
2 Private and Social costs
3 See also

Accounting and Opportunity costs

One important distinction is between accounting cost and opportunity cost (also called "economic cost"). The former is the total amount of money or goods expended in a endeavour. The latter is the value of the most valuable endeavour that had to be foregone in order to pursue the current endeavour--i.e., what could have been accomplished with the resources expended in the undertaking. If a person has a job offer that pays $25 for an hour's work, and instead chooses to take a nap, than the accounting cost of the nap is zero; the person did not hand over any money in order to nap. However, the economic cost is the $25 that could have been earned working. In theoretical economics, cost (used without qualification) often means opportunity cost.

Private and Social costs

Another important distinction is between private cost and social cost; the former is the part of the cost paid by the purchaser of a good or service, while the latter is the part of the same cost paid by society at large. (See Externality.)

One technique in microeconomics is to analyze various costs incurred by consumers and others by type and category.