Real cost:

• According to Marshall, the labourers, capitalists and entrepreneurs who are involved in the process of production bear psychological and physical burden. Such burden is called real cost.
• Money spent by producers for production work of goods is not the only cost of production. Mental factors such as fatigue, boredom tension, stress faced by the labourers, the anxiety faced by entrepreneur or investors who risk their saving and capital, insecurity of wrong decisions, etc. are also the factors included in the real cost.
• Owing to the monetary as well as various other factors, real cost cannot be actually measured in monetary terms. Hence, real cost is also called non-monetary cost.
• As per Marshall, the factors of production have to bear this real cost. So, to attract these factors return is given in the form of wage, interest and profit.

Problems in measuring real cost:

• As per the concept of real cost psychological factors such as fatigue, boredom, pain, sacrifice and anxiety are a part of production of goods. It is quite difficult to measure the real cost of goods which face these psychological factors during production.
• Moreover, other factors such as the smoke emitted by factories, the polluted water released in rivers, streams, etc. create adverse effect on health of the people of surrounding area. From the perspective of society this adverse effect is also a cost which cannot be measured.