cost function

Also found in: Encyclopedia.

cost function

a function that depicts the general relationship between the COST of FACTOR INPUTS and the cost of OUTPUT in a firm. In order to determine the cost of producing a particular output it is necessary to know not only the required quantities of the various inputs but also their prices. The cost function can be derived from the PRODUCTION FUNCTION by adding the information about factor prices. It would take the general form:

Qc = f (p1 I 1 , p2I2, …,pn In)

where Qc is the cost of producing a particular output, Q, and p1, p2, etc., are the prices of the various factors used, while I 1, I2, etc., are the quantities of factors 1, 2, etc., required. The factor prices p 1, p2, etc., which a firm must pay in order to attract units of these factors will depend upon the interaction of the forces of demand and supply in factor markets. See EFFICIENCY, ISOCOST LINE, ISOQUANT CURVE.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
such that the closed loop system is asymptotically stable, [J.sup.*] is the desired cost function, the semi definite positive matrices Q and R are chosen using trial/error method [17].
propose a method based on a cost function to optimize video dehazing that can reduce the loss of information as much as possible while increasing the contrast of the image [24].
This study estimates the coefficients of a translog cost function to determine which factors contribute to economies of scale and their degree of contribution.
The cost function for the clean sector is [C.sub.c]([y.sub.c]) with [C'.sub.c] > 0 and [C".sub.c] > 0.
It allows for calculations of the gradients of the cost function with respect to various input parameters, which incorporate all physical processes included in the governing model, to obtain the minimization of the cost function.
According to Lagrange multiplier method, the first-order derivatives of the Lagrange function should equal zero when the minimum of the cost function is got,
Moreover, in [12-14], a minimum snap cost function was designed to generate smooth trajectory while satisfying a sequence of consecutive waypoints.
In this paper, we use the steepest descent method [18] to find the optimal value [sigma] that minimizes the cost function [[GAMMA].sub.[alpha]] ([sigma]).
Our contribution in this research is severalfold: We estimate a cost function for local public health services with a model grounded in economic theory of the production process where inputs are translated into outputs; we consider separate estimates of economies of scale and scope for several categories of environmental inspections; and we leverage a comprehensive data set that we compile from various sources covering all 74 LHJs in Connecticut, annually from 2005 to 2012.
So in the selection phase, a cost function is built and an optimal path or trajectory that minimizes the cost is selected.
Cost function of a resource is convex, strictly increasing and non-constant.
Part 1 illustrates the estimation of a simple (i.e., one-variable) linear cost function using two different methods in Excel: (1) a chart and its related functionality, and (2) the Regression analysis tool in the Analysis ToolPak.