Struggling to wrap your head around costs in economics? Our A-level economics summary sheet is here to save the day! Dive deep into fixed costs, variable costs, and the concept of opportunity cost. Explore the different types of costs and how they impact businesses and decision-making. Packed with ...
SHORT
COSTS RUN COST CURVES Fixed and Variable cost
ECONOMIC COSTS + OC COSTS Of PRODUCTION-SR Cost
Marginal +
Average cost A rise in FC
Diagram :
↳ ↓ ↳ AVC is variable cost per unit of output
SR : At least I fixed
economic costs are 1 .
Fort is
is determined by shape
of MC
Arc
incurred by a business
Some of businesses constrained
↳
shape of
=>
In SR > are with
producing
=
in these relate returne
engaging fixed +variable
costs
MC due to diminishing
↳
using
is
to OL
supplying
an output
. LR
2 : All forp vanable and the scale of production
output I
are
↳
Average fixed coss I continuously
,
as
benefit from
can also
change allowing the firm to
spread over a higher IvI
economies of scale because The are
being
FIXED
COSTS of
production
VARIABLE
COSTS Are os the diff beween AC + Ave
↳ Don't at all the WL of output
vary as
· Costs are costs that relate directly to the
changes the
in SR
production or sale
of a
product
↳ h be
Has paid ,
whatever the
W
of sales
achieved Tin
Incurred
total
SR output (a) will cause
·
even if output is 0 in the SR variable cost to rise (TVc)
↳ ter the we of fixed cosls in a business
,
RISE IN FIXED
COSTS
Fer must be the output in order to break-even ·
Average variable cost (Ave) = total variable cost
output
Ex :
Consulting fees
↑ in FC >
-
Upward shift in
and
Variable cost is determined
by total cost but don't cause
Rental costs Fixed Salary cos the
marginal
-
cost of extra unils as more labour is hired CAUSES Of SHIFTS In SUPPLY COSTS
the marginal cost curre bo s
Marketing Budgets Business Insurance
· A 1 in FC will only shift the AC not MC
Research Bonuses Basic
projects Ex : Commission naw materials ML curve is the same as the supply Ain variable costs will shift both
that would shof
TOTAL COST = TFC + TVC Wage lock Energy and fuel cors curve-factors supply
Component parts Packaging costa
will also shift M2 Ways in which changes in
gov economic
Addition to total coss of can influence the cosh
of businesses
MARPINAL Cost factors shifts
policy
more unit
Supply
=
Coss
producing one
Derivation of SK cost cures from the causing in
1: A in VAT + other indirect tax
COST Output assumption of diminishing marginal productivity 1 .
Changes in the unit cost of production (Inc pos carbon tax) 2
AVERAGE Total
=
cost = 2 : Environmental taxes
a each tonne of can a
t unit cost - business can more at each price e ↑ 11) of
productivity min price
for
supply g.
inmoducing
a
.
Diminishing Marginal productivity
↳
2SR concept) b .
↑ unit costs -
> inward shift of supply e.
g. Rise
in
wage
rates
such
the 3 A labour market interventions as
↳ When
diminishing returne set on then ↳ use of to explain shape of .
2
Ad
in
.
cost in the Er ↑ prices of imported components
causes national min
labour starts to full
wage
the marginal product of curre in the SR only and new materials subsidy)
. For subsidies
4 targeting producers (employment
When however
.
3 Advances in production tech-outward shift of supply
↑ productivity
>
-
marginal producer of labour declines below More workers >
- as more workers
existing any product then the
arg product of
labour
are added to the fixed amount
. The
4 enny of new
producers into the market-outward sheft
How a rise in min
wage >
-
affect
profitability
of
productivity
↳
=> I capital -
increasingly a busines
will fall searce
Favorable weather
eg agricultural produces
↳
not
enough 5 conditions I effect of 4
a er
legally
Min wage This is because
as
marginal product labour is
.
when of extra
falling At the
pointwhere margin
a protected min
wage hourly wage
godelayed
4
aroun
pay
↑
=
+ in
↳
supply in the labour market. >
-
-
fast food provider
↳
-
↳I in roral ve
product Taxes
experience
start subsidies Employer
cassuming rate) 6 and
gor regulations
can't
paid the same a rise
each worker is pay
wage each other's below it in VC
way
.
,
we that ↓
Marginal cost
of supplying extra output will increase say a .
Indirect taxes
Subsidies
>
-
inward shift of supply
outward shift of supply
Effect
depends
on profit then As a result of
dlift in coss
upward
an
Assuming that
"Diminishing
" whether
whowProduct
returns has set b > on rem
a
-
in
#
.
E
↳ profit
inward shift of supply
a firm passes Ter
on
margins
.
2 Regulations inc costs -
>
cosh to consumers will
↓
↳ depends on PE
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