Private cost refers to the expenses incurred by an individual or a business when producing goods or services. This includes costs such as materials, labor, and overhead. Private costs are essential for determining the profitability of a venture, as they directly impact the financial performance of the entity involved. In economic terms, private costs do not account for externalities, which are costs or benefits experienced by third parties. For example, if a factory produces pollution, the private cost only includes the factory's operational expenses, while the environmental impact is not reflected in the private cost calculation.