The traditional theory of cost refers to the popular traditional belief of businesses that cost affects the quantity of output. On the other hand the Modern theory states that the cost affects the quality of the output produced rather than quantity. This belief signifies the change in the business outlook. As customer satisfaction is the prime motive of businesses today.
Both are theories they both can not be proven right or wrong,except they are distinguish by the fact that one is called Traditonal meaning something always believed to be true and still is, where something labled modern is a relatively recent belief to be held as true. Still neither one can be held to be absolutely true. An example of the modern theory that cost affects the quality of output, that it's not always true, is by what can be observed or heard that the oil companies are doing. They tell us, " Their higher cost is affecting the quantity of thier output." True they may have higher costs, but as modern theory goes it should be affecting the quality of the product they produce, which it is definitely not the case. Proving that the modern theory is not always correct or as it is justly called a "theory". Also the traditional belief of cost affecting the output of a company's product can be dispproved is also noted by observing how the oil companies do business, they are able to meet the demand of the consumers, as we do not see long lines at the gas stations as was observed in the 70's, dispproving the old traditional theory as not always correct to belief. The only thing that distinguishs a popular 'Traditional' theory' from a 'Modern' theory is the time element, the traditional theory has been believed as true for a longer period of time and still is, where 'Modern' theory has only recently been believed as true. But,they are both the same, in the fact, that neither one can not be called the absolute true.