Cost Function

Definition: The cost function is a function of input prices and output quantity. Its value is the cost of making that output given those input prices.

A common form:

c(w₁, w₂, y) is the cost of making output quantity y using inputs that cost w₁ and w₂ per unit.

Terms related to Cost Function:

• The Cost Curve
• Marginal Cost
• Sunk Costs

About.Com Resources on Cost Function:

• How to Understand and Calculate Cost Measures
• What are Opportunity Costs?
• Marginal Revenue and Marginal Cost Practice Question

Writing a Term Paper? Here are a few starting points for research on Cost Function:

Journal Articles on Cost Function:

• A Cost Function Approach to the Measurement of Elasticities of Factor Demand and Elasticities of Substitution
• Flexible Cost Functions for Multiproduct Firms
• The specification of a hospital cost function