Cost Function

Definition

The cost function is a mathematical equation that represents the relationship between the number of units produced and the total cost of production. It helps calculate how much it costs to produce a specific quantity of goods.

Related terms

Marginal Cost: The rate at which the total cost increases as the quantity produced increases by one unit.

Fixed Costs: Expenses that do not change with the level of production, such as rent or insurance.

Variable Costs: Expenses that vary with the level of production, such as raw materials or labor.