Definition of social cost – Social cost is the total cost to society.

It includes private costs plus

any external costs.

 Costs of paying for petrol (personal cost)

 Costs of increased congestion (external cost)
 Pollution and worse air quality (external cost)
 The social cost includes all the above.

Example of social cost of building airport

Private costs of airport

 Cost of constructing an airport.

 Cost of paying workers to run airport

External costs of airport

 Noise and air pollution to those living nearby.

 Risk of an accident to those living nearby.
 Loss of landscape.
 Importance of social cost
 Rational choice theory suggests individuals will only consider their private costs. For
example, if deciding how to travel, we will consider the cost of petrol and time taken to
drive. However, we won’t take into consideration the impact on the environment or
congestion levels for other members in society.
 Therefore, if social costs significantly vary from private costs then we may get a socially
inefficient outcome in a free market.

Economic Cost Definition

The total cost of choosing one action over another. The

economic cost includes the accounting cost, or actual funds spent carrying out the action, and
the opportunity cost, or the amount of money that could have been made by using funds and
other resources dedicated to the action on some other objective.

Economic cost is the combination of gains and losses of any goods that have a value attached to
them by any one individual. Economic cost is used mainly by economists as means to compare
the prudence of one course of action with that of another. The goods to be taken into
consideration are e.g. money, time and resources.
The comparison includes the gains and losses precluded by taking a course of action, as those of
the course taken itself. Economic cost differs from accounting cost because it
includes opportunity cost.[1][2]

1
Consumer marketing is defined as creating and selling products, goods and
services to individual buyers, as opposed to trying to appeal to businesses.
Commercials trying to sell toys or books or movies to the average individual
are examples of consumer marketing. YourDictionary definition and usage
example.
Production

Production is a process of combining various material inputs and immaterial inputs (plans,
know-how) in order to make something for consumption (the output). It is the act of
creating output, a good or service which has value and contributes to the utility of
individuals.[1]
Economic well-being is created in a production process, meaning all economic activities that
aim directly or indirectly to satisfy human wants and needs. The degree to which the needs
are satisfied is often accepted as a measure of economic well-being. In production there are
two features which explain increasing economic well-being. They are improving quality-
price-ratio of goods and services and increasing incomes from growing and more efficient
market production.
The most important forms of production are

 market production
 public production
 household production

Factor Market

In economics, a factor market refers to marketswhere services of

the factors of production are bought and sold, such as the labor markets, the
capital market, the market for raw materials, and themarket for management
or entrepreneurial resources. ... Production is the transformation of inputs into
final products.