Cost function expresses the relationship between cost and its determinants. There are several factors that influence the cost which includes size of plant, price of input, level of output, technology, etc when their relationship is established with cost it is called cost function.

The cost function can be formulated for short run as well as for long run but these two are interrelated. The cost function can be linear or nonlinear depending upon the nature and behaviour of cost.

The cost function depicts the least cost combination of inputs associated with different level of inputs. Therefore, it depicts the output-cost relationship.