Question

What are the different types of cost and how does it relate to economics ?

Answer 1

The different type of cost in the economics are:

Fixed cost: Thi cost is incurred by the firm while starting a business and these are the cost which doesn't change with the time. These are land, building, machinery etc.

Variable cost: Variable cost are the cost which is used in the production of the goods in the firm. these costs changes as the production increase or decrease in the economy. These are wages, electricity etc.

MArginal cost: THese are the changes in the cost which the firm faces with an increase in the production or we can say it is the increased cost of an extra output.

The cost of the frim is important because it allows the firm to set a price for its products. In an economy, the firm can't earn a profit or cannot become effective if they don't know the cost structure of their firm.