costs of production
- Created by: katier1234
- Created on: 06-11-19 18:14
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- Costs of production
- Costs are expensive faced by a business when producing a good or a service
- fixed costs- these do not vary directly with the level of output
- e.g wages, rent, interest charged on money, depreciation on equipment
- Variable costs- these directly vary with the level of output
- e.g raw materials, some labour costs
- fixed costs- these do not vary directly with the level of output
- Total cost= fixed costs+ variable costs
- Average total costs- two ways
- total costs/ output
- Average fixed costs+ average variable costs
- to get the average you do either fixed or variable costs divided by output
- Marginal cost- The amount added to the total cost of production by the next unit of output
- Average costs falling as output rises
- Increased volume of units produced, the lower will be the fixed cost per unit as the fixed costs are spread over a higher number of units
- This is one reason why mass production can bring down significantly the unit costs for consumers- as the fixed costs are coming down as the firm expands
- Increased volume of units produced, the lower will be the fixed cost per unit as the fixed costs are spread over a higher number of units
- Costs are expensive faced by a business when producing a good or a service
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