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Distinction between production costs and selling costs has been explained by Professor Chamberlin. According to him, Production costs are those costs which are incurred by a firm to produce a given variety of product. These costs include costs of raw materials, wages, interest, etc., that is, production costs include all those expenses which are incurred in the manufacture of the commodity and its transportation to the consuming centers.

According to Professor Chamberlin, Selling costs include all those expenses which are incurred in order to secure a demand or a market for the product.

Production costs create utilities which will satisfy demand, while selling costs create and shift the demand itself.

It is too difficult in many cases, to make a sharp distinction between production costs and selling costs since they are found together throughout the price system. Certain items of expenditure may be included in both the costs. For eg, attractive packaging of the product is an item which can be included in production costs as well as both in selling costs. In other sense, it means, in many cases there is a very thin line of demarcation between production costs and selling costs.

Production costs create supply while selling costs create or increase demand.

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