Free Notes Download Link - t.me/jhansi_institute Microeconomics Chapter 8 Concept of Cost Part 2 Short Run Cost Curves
Total Cost is equal to Total Fixed Cost and Total Variable Cost
TC = TFC + TVC
Table and Diagram of Total Cost
Table and Diagram of Total Fixed Cost
Table and Diagram of Total Variable cost
Fixed Cost and Variable Cost the difference
SHORT RUN COSTS
TC = TFC + TVC
SHORT RUN
Short run is a period of time during which some factors are fixed
and some are variable. Accordingly, short run costs have two
components, viz.,
(1) fixed costs, referring to expenditure on fixed factors, and
(2) variable costs, referring to expenditure on variable factors.
(A) Fi x e d Co s t
Fixed costs refer to the expenditure incurred by the producer on the use of fixed factors of production. These costs do not change with the change in the volume of output. Fixed costs are incurred even when output is zero. These costs are also called supplementary costs,
or overhead costs or indirect costs.
Principal Components of Fixed Costs
(i) Expenditure on machine and plant.
(ii) Expenditure on land and building
(iii) Licence fee
(iv) Wages and salaries of permanent staff
(B) Va r i a b l e Co s t s
Variable costs are those costs which are related to the use of variable factors. Variable costs refer to the expenditure incurred by the producer on the use of variable factors of production.
Principal Components of Variable Costs
(i) Cost of raw material.
(ii) Wages of casual workers
(iii) Expenses on electricity.
(iv) Wear and tear expenses
Behaviour of fixed Cost
Variable Cost and Total Cost
Behaviour of Fixed Cost ,Variable Cos t and Tot al Cost
Fixed Costs Variable Costs Fixed costs ore the costs incurred on the fixed
factors of production. Variable costs ore the costs incurred on the
variable factors of production Fixed costs do not change with increase or
decrease in output Variable costs increase with increase in output
and decrease with decrease in output Fixed costs remain constant even when output is zero Variable costs are zero when output is zero
Fixed costs ore incurred even before production actually starts
Variable costs ore incurred only when production actually starts
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