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Smt. Chandhibai Himatmal Mansukhani College
Smt. Chandhibai Himatmal Mansukhani College
PRESENTED BY:
LAVINA KHATRI
AGENDA
1.Cost 2.Types Of Cost 3.Cost Concept 4.Cost Curves 5.Types Of Cost Curves 6.Short-Run And Long-Run Decision Making 7.Example of cost concept
1.costs
1.Influential factor on the supply side. 2.Expenditure incurred for various factors of production. E.g: land,labour,capital,etc. 3.Renumeration paid to the factors of production for their services.
2.TYPES OF COSTS
1.VARIABLE COSTS: 2.FIXED COSTS:
These Cost Exist Whether Production Occurs Or
Not. In The Long-Run There Are No Fixed Costs. Can Be Both Cash And Non-Cash Expenses. E.G:- Depreciation On Tractors And Buildings, Etc.
3.COST CONCEPTS
1.Real costs:
(It refers to the actual quantities of various factors used in producing a commodity. E.g. the real cost of producing a chair is the amount of wood,nails,carpenters labour.)
2.Money cost:
(It is the cost of production expressed in terms of money. It is the money spent on various resources used in the production process.)
3.COST CONCEPTS
Implicit cost:
(It is the cost incurred by the business firms on the factors of production owned by it. E.g. own land rented to somebody and rent used for cost of production.)
1.SHORT-RUN 2.LONG-RUN
4.COST CURVES
1.Cost Curve Is A Graph Of Cost Of Production
TVC
TFC
Output
AVC
AFC
Output
(Profit = TR TC.) Production Level MR = MC When MR > AVC In The ShortRun If MR AVC, we would have to shut down Why? MR = MC, we want to produce at a level where MR is as close as possible to MC, where MR > MC.
Envelope Curve.
Tangent curve. Long run planning device.
Y
10 30 48
TVC 1000 1600 2000 2200 2600 3200 4000 5000 6200 7600
TC 2000
2600 3000 3200 3600 4200 5000 6000 7200 8600
ATC
MC
200
86.67 62.50 49.23 45.45 43.75 46.30 51.72 60.00 73.51 30 22.22
22
26 32 40
65
81 96 108
1000
1000 1000 1000
15.38
12.35 10.42 9.26
33.85
32.10 33.33 37.04
11.76
25 40 66.67
50
62 76
116
120 117
1000
1000 1000
8.62
8.33 8.55
43.10
51.67 64.96
125
300 -466.67
TVC
TFC
Output
AVC
AFC
Output
CONCLUSION:
In this manner, We gathered knowledge regarding cost,
cost concept, cost curves in detail. In short, Cost is expenditure incurred for various factors of production. Cost concept is used to analyze two things: (a) short-run decision making. (b) long-run decision making. Cost curve is a graph of cost of production which helps to determine profit.