Biodiesel is an alternative fuel similar to conventional diesel. It is usually produced from straight vegetable oil, animal fat, tallow, non-edible plant oil and waste cooking oil. Its biodegradability, non-toxicity and being free of sulfur and aromatics makes it advantageous over the conventional petrol diesel. It emits less air pollutants and greenhouse gases other than nitrogen oxides. In addition, it is safer to handle and has lubricity benefits than fossil diesel. However, with all these environmental benefits, biodiesel could not be extensively applied as a complete substitute fuel for conventional diesel. The main reason, repeatedly mentioned by many researchers, is its higher cost of production. Reduction of the cost of biodiesel production (unit cost of production) can be attained through improving productivity of the technologies to increase yield, reducing capital investment cost and reducing the cost of raw materials. These demand a thorough execution of economic analysis among the available possible technology alternatives, catalyst alternatives, as well as feedstock alternatives so that the best option, in economic terms, can be selected. With this respect, there are a number of researches done to investigate economically better way of producing biodiesel as a substitute fuel. Accordingly, this paper is meant to review the researches done on economics of biodiesel production, emphasizing on the methods of assessment and determination of total investment cost and operation cost, as well as on assessment of economically better technology, catalyst and feedstock alternatives. It also gives emphasis on profitability of biodiesel production and the major system variables affecting economic viability of biodiesel production.