Meaning of Cost

Meaning of Cost

In business and everyday life, there are two main ways to look at what things cost. We look at it from the side of the accountant and from the side of the economist.

The accountant says that cost is how much money you paid to get something.

According to the accountant, the cost is the amount incurred in acquiring a certain commodity or the amount spent in satisfying one's want.

This means if you buy a loaf of bread for 800 Naira, the accountant says the cost is that 800 Naira you spent.

The economist has a bigger way of looking at it, because they look at both the money spent and what you had to give up.

However, from the perspective of the economist, the cost is a much broader concept that can be divided into money cost and opportunity cost (also called real cost or true cost).

So, for the economist, cost is not just about the cash, it is also about the other things you could not buy because you bought that bread.

The economist thinks that what the accountant says is just the money part, but the real cost to a person is the thing they sacrificed.

The economist believes that the account definition of cost is basically actual cost but the cost to an individual is the opportunity cost which is the sacrifice made in order to satisfy a more pressing want.

This means if you had enough money for either a book or a bag, and you chose the book, the bag you did not buy is your real cost.