My question is related to economics. What are real costs?

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Ashley Kannan eNotes educator| Certified Educator

The concept of real costs is an all encompassing idea.  From an economic point of view, real costs refers to the cost of producing a good or service, including the cost of all resources used and the cost of not employing those resources in alternative uses (see website link below.)  The idea of determining real cost helps manufacturers better understand how much money will be needed to generate a product in multiple domains.  For example, real costs would include, but not be limited to, production, market analysis, distribution, and advertising.  In this process, both total cost and overall value is determined and assessed.  This will help crystallize the vision of a product's profit and whether further investment is warranted.  In a real world setting, when one is determining the real cost of owning an automobile, they would have to factor in not only the purchase of the vehicle, but maintenance, gasoline/ petrol expenditures, insurance, renewal of title and ownership deeds, to name a few.  Real costs analysis gives a greater picture of a product and the spending associated with it.