MATHS PROJECT

COST, AVERAGE COST

AND MARGINAL COST
SECTION-C

KARA
N
JAKH
UID NUMBER-
ARIA
 ACKNOWLEDGEMENT
I, Karan Jakharia would like to express my gratitude towards my
Principal Mam Mrs. Revathi Srinivasan who gave me this golden
opportunity to express myself in this project. An ocean full of
gratitude to my Maths teacher Mrs. Rajeshwari S who gave me this
topic and helped me whenever and wherever possible. I would like
to to thank my parents and my sibling who helped me prepare this
project. Also I would like to thank my fellow mates who helped me
make this project.
 INDEX
Sr No. Topic Page No.
1 Aim and introduction 4
2 Cost 5
3 Average cost 6
4 Marginal Cost 7
5 Relationship between AC and MC 8
6 Example 9
7 Reflection 10
8 Bibliography 11
 AIM AND INTRODUCTION
Aim- The aim of the project is to draw a rough sketch of cost,
average cost and marginal cost.

Introduction- The different types of cost namely total cost, average

cost and marginal cost are very important for the businesses. These
costs are used by producers to analyse the amount they will have to
spend on producing a commodity. It also determines the price of the
commodity. As the cost plus desired profit will determine the price of
the commodity. Not only in producing units but also service giving
businesses need to analyse cost to decide upon the price of their
services.

The cost is calculated mathematically using calculus. The cost

function denoted by C(x) is a mathematical formula where ‘x’
represents the number of units produced, that gives the total cost to
produce a certain number of units.

Besides total cost we can also use the cost function to calculate the
average cost and marginal cost.
 COST
DEFINITION-Cost is the total amount of money spent on all types of
inputs- fixed(like machinery) and variable inputs(like labour) incurred
in producing a given quantity of a commodity.

FORMULA - C(x) = F + V(x)

Where: C = Cost function

X = Number of units produced

F = Fixed cost of production

V = Variable cost of production

The total fixed cost remains constant always but variable cost
constantly changes with the change in units of production.

The Cost Curve is the sum total of fixed cost curve and variable
cost curve. The curve starts from a point on Y axis as cost can never
be zero. It is concave downwards initially which shows cost increases
at decreasing rate and then it is concave upwards which shows that
cost increases with increasing rate.
 AVERAGE COST
DEFINITION- Average Cost is the per unit cost of the product.

FORMULA - AC = C(x) / x

Where: AC = Average Cost

C(x) = Cost Function

X = Number of units produced

The Average Cost curve is a ‘U’ shaped curve.The falling portion is

due to increasing returns and rising portion is due to decrease in
returns.
 MARGINAL COST
DEFINITION- Marginal cost is the additional cost incurred by
producing an additional unit of a commodity.

FORMULA – MC=d [C(x)] / dx

Derivative of Cost

Since MC is the differentiation of cost function hence the graph is the

slope of the cost curve and hence the cost curve is a ‘U’ shaped
curve.
 RELATIONSHIP BETWEEN AC AND MC
From the above graphs we understand that :-

 As long as MC is less than AC, AC falls.

 When MC is more than AC, AC rises.
 MC cuts AC at its minimum point (here S)
 EXAMPLE
Question-

Classmate Ltd produces x quantity of commodity. The cost function

given is C(x)= 3x²-6x+5

Find out-

1. Average cost
2. Marginal Cost
3. AC and MC when x=2

Solution:

1. AC= C(x)/x

=(3x²-6x+5)/x

=3x-6+5/x

2. MC= d [C(x)] / dx

= d[3x²-6x+5]/dx

MC= 6x-6

3. AC=3*2-6+5/2

AC= 6-6+2.5

AC=2.5 when x=2

MC= 6*2-6

AC=6 when x=2

 Reflection
I have learnt a lot about cost, average cost and marginal costs
in this project.
This project brings about a relationship between marginal
costs and average costs. Although not included in the project
I have learnt not only about above given costs but also
several other costs concepts. This project also will help me
with various other subjects like commerce where we have to
try to forecast profit by cost cutting and economics where we
study about factor costs.
The deep study of this project will always be beneficial for
me.
 BIBLIOGRAPHY
 ISC Mathematics by OP Malhotra
 Frank Economics textbook
 Allbusiness.com