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Fixed costs are those which are independent of output that is they do not change with changes in output. These costs are a fixed amount which must be incurred by a firm in the short run whether output is small or large. Even if the firm closes down for some tie in the short run but remains in business these costs have to be borne by it. Fixed costs are also known as overhead costs and include changes such as contractual rent insurance fee maintenance costs property taxes interest on the capital invested minimum administrative expense such as mange salary watchman’s wages etc. thus fixed cost are those which are incurred in hiring the fixed factor of production whose amount cannot be altered in the short run.Variable Costa on the other hand is those costs which are incurred o the employment of variable factors of production whose amount can be altered in the short run. Thus the total variable costs change with changes in output in the short run they increase or decrease when the output rises or falls. These costs include payments such as wages of labour employed price of the raw materials fuel and power used, the expenses incurred on transporting and the like. If a firm shuts down for some time in the short run, then it will not use the variable factors of production and will not therefore insure any variable costs increase with the increase in the level of production. Variable costs are also called prime costs or direct costs. Total coats fo a business is the sum of its total variable costs and total fixed costs. ThusTC = TFC + TVCWhere TC stands for total cost TFC for total fixed cost and TVC for total variable cost,Because one component the total variable cost (TVC) varies with the changes in output the total cost of production (TC) will also change with the changes in the level of output. The total cost increases as the level of output rises.It should be noted that total cost (TC) is a function of total output (Q) the greater the output the greater will be the total cost in symbols we can writeTC = f(Q)Where Q stands for outputWe can prove this as followsTC = TFC + TVC.
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Q. Explain about Demand - Constrained? Demand-Constrained: An economy is demand-constrained when level of output and employment is limited by the amount of overall demand (or s
As you know, Northern Nevada Green Coalition is interested in showing how green energy production can help to grow and diversify Nevada's economy. In order to do that, we need to a
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Why is it true that shortages usually occur mainly when price controls are in effect? In the nonexistence of price controls the shortage generally goes away quickly because price
The market demand for brand X has been estimated as Qx=1500-3Px-0.05I-2.5Py+7.5Pz Where Px is the price of brand X, I is per-capita income, Py IS the price of brand Y, and Pz is th
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The "Battle of Sexes" is a famous game. The story is that a couple tries to decide what to do on a Friday evening. The girl prefers to go to an Opera and the guy prefers to go to t
Wage Labour: A form of work in that employees perform labour for others, under their direction, in return for salaries orwages. Employer controls and owns the product of the labour
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