The inclusion of cost in the concept of economy is indeed a rational step in the right direction.
Production is a , factor in the economy. In order to produce, a producer will have to obtain certain resources and at the same time give up certain resources.
According to the accountants, cost is the value, amount or price that is paid for good or service. With this, it can be said that the accountants are concerned with the explicit price that is paid to obtain something.
To the economists, cost is viewed in term of forgone alternative. That is,what a person lose by taking a line of action; what a person lose by investing his resources in a particular venture; what a person lose by taking up a particular job; let me cite an examples.....
Prior to the commencement of productive activities, an entrepreneur considers the money cost, the opportunity cost and the social cost.
The money cost
The money cost connotes the amount of money paid to obtain a good or receive a service.
The opportunity cost
The opportunity cost is the alternative forgone,the sacrifice made or what is lost to obtain something or to choose a particular thing.
The social cost
The social cost is borne by other people. The activities of a firm may occasion a social cost. The noise emanating from the factory where an entrepreneur produce his products is a kind of social cost to be borne by the people around the place.
It must be noted that a major motive of an entrepreneur is keeping the cost of production low. The more he is able to achieve this ,the more he is able to produce. When the entrepreneur enjoys a reduced cost, the chance of profit maximisation can be guaranteed.
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Weldone