Definition of Real Cost:
Real cost refers to the actual cost incurred in the production of goods and services. It includes all the expenses involved in the production process, such as raw materials, labor, rent, utilities, and other overhead costs.
Real cost is an important concept in economics as it helps in determining the true value of goods and services in the market. It is essential for businesses to accurately calculate their real costs to set prices and make informed decisions about production and pricing strategies.

Factors affecting Real Cost:
1. Raw materials: The cost of raw materials used in production directly impacts the real cost of goods.
2. Labor: The wages and benefits paid to workers contribute to the overall real cost of production.
3. Overhead costs: Expenses such as rent, utilities, insurance, and taxes also add to the real cost of goods.
4. Technology: The use of technology and machinery in production can affect real costs by increasing efficiency and reducing labor costs.
5. Economies of scale: Larger production volumes can help reduce real costs through lower per-unit costs.

Importance of Real Cost:
- Accurate pricing: Knowing the real cost of production helps businesses set prices that cover expenses and generate profits.
- Cost control: Understanding real costs allows businesses to identify areas where costs can be reduced and efficiency improved.
- Decision-making: Real cost analysis helps in making informed decisions about production processes, pricing strategies, and resource allocation.
- Competitiveness: Knowing real costs helps businesses stay competitive in the market by offering products at competitive prices while maintaining profitability.
In conclusion, real cost is a crucial concept in economics that impacts pricing, decision-making, and competitiveness in the market. Businesses must accurately calculate their real costs to ensure sustainability and success.