| Real Cost | Money Cost |
| 1. Real cost refers to the efforts and sacrifices made by the owners of factors of production used in the production of a commodity. | 1. Money cost refers to money expenses which the firm has to incur in purchasing or hiring the factor services. |
| 2. It includes the pain, sacrifice, discomfort and disutility involved in providing factor services required to produce a commodity. | 2. These expenses include the money expenditures of a firm on wages and salaries paid to labour, payment of interest on borrowings, rental payments, payment for raw material. |
| 3. The concept of real cost has no practical significance because it is a subjective concept that makes it difficult to estimate real cost. | 3. Accounting books of a firm record these actual money expenses made by the firm on the factors of production as the cost of production. |
