Cost refers to the amount of money required to purchase goods or services. It can include various factors such as production expenses, labor, materials, and overhead. Understanding cost is essential for businesses to set prices and manage budgets effectively. In economics, cost can also refer to the opportunity cost, which is the value of the next best alternative that is forgone when making a decision. For example, if a person spends money on a new phone instead of saving for college, the opportunity cost is the potential benefits of attending college.