Difference Between Price and Cost

Updated on July 1, 2024
Article byHarsh Katara
Edited byAaron Crowe
Reviewed byDheeraj Vaidya, CFA, FRM

Price vs Cost Differences

The key difference between cost and price is the amount of expenditure incurred by the business on materials, labor, sales, utilities, and other business activities. In contrast, price refers to the amount that the business charges its customers for providing their goods and services to the customer, and the customer has to pay such an agreed amount to get the goods or services.

Price and cost are the terms that are frequently used and mentioned in the context of revenue, i.e., sales. They are used interchangeably in our normal day-to-day conversation, but when it comes to economics or business, each term takes on a separate meaning and must not be perplexed by one another.

What is the Price?

Technically speaking, a price can be termed as the amount of money a consumer or client must waive to acquire certain services or products. It also involves the future acquisition of the service or product if the client or consumer pays the said amount.

Price vs Cost Differences

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Source: Difference Between Price and Cost (wallstreetmojo.com)

What is the Cost?

A cost can be the amount paid to produce a service or product before it is sold or marketed to its intended clients or consumers. Looking at it this way, the cost would imply the amount of money involved in marketing, production, and distribution. The term can also refer to the money needed to maintain a service or product.

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Price vs. Cost Infographics


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Source: Difference Between Price and Cost (wallstreetmojo.com)

Key Differences Between Price and Cost

  • Price is what you pay for services or goods that you acquire; Cost is the number of inputs that occur in producing the firm’s product.
  • The price will remain the same for all the consumer customers. Cost is also the same for all consumers or customers. However, the cost differs only for the firm that prepares it.
  • We estimate the price through a policy set up for the price. At the same time, we assess the actual expenditure on manufacturing that product.
  • The ups and downs in the market affect the cost and price of any product. The only difference is that changes happening in cost are outside the company’s scope, and it cannot do anything for the same. In contrast, a company can reduce its impact by reducing the product price, which remains in the hands of the company.
  • The ascertainment of price, as mentioned earlier above, is done with the view of the client or the consumer. At the same time, ascertainment of the cost is from the company’s or producer’s view.
  • If you purchase a brand-new vehicle like a car, the amount you will pay to the seller for its acquisition will be its price. At the same time, the amount invested in manufacturing that same car is its cost. Normally, the price of any service or goods will be more than its cost because the price includes the profit margin and the cost of preparing the product.

Comparative Table

Basic DefinitionWe can define it as the amount a client or customer is willing to pay for a service or product.We can term it as the expense which incurs for selling a service or product by an organization. The costs that are involved in manufacturing can include the raw materials that are used in making that product.
Nature Every Organization should determine the price that the customers are willing to pay for their service or product, while they also must be mindful of the cost of bringing that service or product to the market.For certain companies, the sum costs of making a product are listed under the cost of goods sold (COGS), which is the total sum of the direct costs that are involved in a production. These costs can include direct materials costs, such as raw materials and direct labor costs for the manufacturing plant.
Ranking (at business Level)Price comes after the determination of all the costs.The cost comes first that is before Price.
Ascertainment We can ascertain it from the client’s or consumer’s perspective.We can ascertain it from the manufacturer’s or producer’s perspective.
ClassificationIt can be also be further classified as a bid price, selling price, buying price or transaction price etc.It can be also be further classified as a variable cost, fixed cost or opportunity cost, etc.
In terms of ValueIt is a combination of cost, which is mostly production.These are lowered when they are compared with the cost in terms of value.


Price and cost are often used interchangeably in our normal daily conversation. However, as mentioned at the beginning of the article, the two terms have completely different meanings when applied in economics or business.

  • Cost is the amount of money spent on different activities to make or maintain a service or product. In contrast, price, as told earlier, implies future acquisitions of the service or product.
  • Both refer to the element of money. In price, the use of money is to gain something. The cost will refer to the money in the production or manufacturing process like wages, labor, materials, capital, bills, and other transaction costs.
  • We ascertain the price by adding the production costs and the seller’s profits. In this context, a cost can be a subset or component of the price. In addition, the value of the cost will be lower than the value of the price.
  • The client or the consumer generally demands a price. Cost, on the other hand, is demanded by the seller. The price is a future income for the seller. On the contrary, cost represents all the past expenses.

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