Neha Cost Revenue Ppt Friday

8/14/2019 Neha Cost Revenue Ppt Friday

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BY:-

NEHA SHARMA

CENTRAL UNIVERSITY OF RAJASTHAN


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Expenditure incurred by a producer on fixed andvariable inputs may be termed as cost of

production. The expense that must be incurred in order toproduce goods for sale.


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1)Short Run Cost

2)Long Run Cost


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In the long run all the factors are variable.

Long run costs:- In the long run there are no

fixed costs since all the costs are variable.


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TOTAL FIXED COST:- fixed costs are

those which are independent ofoutput and that are spent and can notbe changed in the period of time.


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0

2 0

4 0

6 0

8 0

1 0 0

0 1 2 3 4 5 6 7 8

TFC

Output

(Q)

0

1

2

3

4

5

67

TFC

()

12

12

12

12

12

12

1212


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Short Run CostsTOTAL VARIABLE COSTS:-Total variable cost is

the sum of amounts spent for each of thevariable inputs used.

Total variable cost change with changes inoutput in short run. they increase or decreasewhen the output rises or falls.


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0

20

40

60

80

1 0 0

0 1 2 3 4 5 6 7 8

TVC

Output

(Q)

0

12

3

4

5

67

TFC

()

12

1212

12

12

12

1212

TVC

()

0

1016

21

28

40

6091

TFC


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Total CostsThe Sum of the variable and fixed costs are

total costs.

TC=TFC+TVC


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fig

0

2 0

4 0

6 0

8 0

1 0 0

0 1 2 3 4 5 6 7 8

TC

Output

(Q)

0

12

3

4

5

67

TFC

()

12

1212

12

12

12

1212

TVC

()

0

1016

21

28

40

6091

TC

()

12

2228

33

40

52

72103

TVC

TFC


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Average CostAverage cost is equals to total cost divided by

output.

AC=TC/Q AC=AFC+AVC


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Average CostAVERAGE FIXED COSTS:-Average fixed cost is

equals to total fixed cost divided by quantityproduced .

AFC=TFC/Q


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Average CostAVERAGE VARIABLE COSTS:-Average variable

cost is equals to total variable cost divided byquantity produced .

AVC=TVC/Q


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Marginal CostChange in total cost due to one unit change in

output.

MC=TCn-TCn-1


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fig Output (Q)

Costs(

)

MC


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fig Output (Q)

Costs(

)

AFC

AVC

MC

x

AC

z

y


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Relationship B/W Average and

marginal costsIf MCAC then AC is rising.


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Long run total cost

Long run average cost

Long run marginal cost


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Long Run Total CostsThe long run total cost is the minimum

Cost at which each level of output can beproduced.


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Long Run Average

Costs[ENVELOPE CURVE]The long run average cost is that which shows the

minimum cost per unit of producing each output level,

corresponding to different scales of productivity.


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Why LAC is U Shaped1) Economies of scalesa) internal economies

b) external economies

2) Diseconomies of scales

a) internal diseconomies

b) external diseconomies


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SYNTHESISAccording to the modern economists LAC is L

shaped.

Theoretically LAC is U shaped but practically itis L shaped.

Like in the multinational corporations LAC is Lshaped.


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Marginal Cost CurveIn the long run ,change in total cost due to

one unit change in output is known as longrun marginal cost.


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fig

OutputO

Costs

LRMC

LRAC

Initial economies of scale,

then diseconomies of scale


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Long run average and

marginal costsWhen LRMCLRAC then Ac is rising.


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The money that comes into the firm from the

scale of their goods.

a)Total revenueb) Average revenue

c) Marginal revenue


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RevenueTotal revenue:-Total revenue of a firm is the

total money receipts with the scale of its

product.The product of price and the number of units

sold will give us the firms total revenue.

TR=P*Q where p=price/unit

Q=quantity of goods sold


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RevenueAverage revenue:-Average revenue is the

per unit revenue received from the sale of

one unit of a commodity.AR=TR/Q

AR=(P*Q)/Q

AR=P


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RevenueMarginal revenue:-change in total revenue

due to one unit change in output .

MR= TRn-TRn-1


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fig

O O

Price(

)

AR,MR()

Pe

S

D

P = AR

= MR

Q (millions) Q (hundreds)

(a) The market (b) The firm


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fig

-4

-2

0

2

4

6

8

1 2 3 4 5 6 7

Q

(units)

1

23

4

5

6

7

P

=AR

()8

76

5

4

3

2

TR

()

8

1418

20

20

18

14

MR

()

6

4

2

0

-2

-4

MR

AR,M

R()

Quantity

AR


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THANKSQUESTION & ANSWER SESSION

Neha Cost Revenue Ppt Friday

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