Concept of total, average and marginal revenue, Derivation of revenue curve under perfect competition and monopoly. Fixed and variable cost, Concept of short run and long run cost. Derivation of short run cost curves
Revenue can be defined as the amount collected by a producer by selling his production. There are three types of revenue: Total Revenue, Average Revenue and Marginal Revenue.
A firm produces goods it has to incur expenses. Such expenses are payments to labor, land owners, capital, purchase of raw materials, fuels etc. Cost is concerned with a financial aspect of production. A firm produces goods it has to incur expenses. Such expenses are payments to labor, land owners, capital, purchase of raw materials, fuels etc. Cost is concerned with financial aspect of production. There are different types of cost in economics. Among them, the concept of fixed and variable costs are discussed. Fixed Cost The expenses made for setting up the production plant are the fixed cost. It doesn’t change in the short time period and also doesn’t depend on the quantity of production. For e.g.: cost of machinery, building, managerial team etc. are the fixed cost. It is also known as overhead cost or supplementary cost. Variable Cost Variable cost is the one which changes along with the quantity production. For e.g. expenses for raw material, energy use, daily wage labor etc. are the variable cost. Thus, variable cost is those which vary with variation in the total output.