SMT.

CHANDHIBAI HIMATMAL MANSUKHANI COLLEGE

PRESENTED BY:
y LAVINA KHATRI

- 29 y VINAY ARTWANI(GROUP LEADER) - 30 y HITESH KUKREJA - 31 y HARSHA MATTA - 32

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:

These Costs Exist Only If Production Occurs.

E.G:- Fuel For Tractor, Seed, Etc.

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
y 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.)

y 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
y 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.)

COST CONCEPTS(R) IT IS USED TO ANALYZE TWO THINGS

1.SHORT-RUN 2.LONG-RUN

4.COST CURVES

WHAT ARE 2. Determines Profit COST CURVES 3. Basic Categories:? (A) Total cost Curves
(B) Average cost curves

1.Cost Curve Is A Graph Of Cost Of Production

5.TYPES OF COST CURVES

 Total Fixed Costs (TFC)  Total Variable Cost (TVC)  Total Cost (TC=TFC+TVC)  Average Fixed Costs (AFC)  Average Variable Cost (AVC)  Average Total Cost (ATC=AFC+AVC)  Marginal Cost (MC)

TYPICAL TOTAL COST CURVES

$ TC

TVC

TFC Output

AVERAGE AND MARGINAL COST CURVES

$ MC ATC

AVC

AFC Output

6.SHORT-RUN DECISION MAKING

There Are Many Ways To Choose How To Produce. Profit Maximization

(Profit = TR TC.) Production Level MR = MC When MR > AVC In The ShortRun If MR e 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.

6.LONG-RUN DECISION MAKING

y Course of action. y Numerous aspects of the short run. y Envelope Curve. y Tangent curve. y Long run planning device. y Minimum cost combinations of inputs.

6.LONG-RUN AVERAGE COST

7.EXAMPLE OF COST CONCEPTS

X 10 16 20 22 26 32 40 50 62 76 Y 10 30 48 65 81 96 108 116 120 117 TFC 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 TVC 1000 1600 2000 2200 2600 3200 4000 5000 6200 7600 TC 2000 2600 3000 3200 3600 4200 5000 6000 7200 8600 AFC 100 33.33 20.83 15.38 12.35 10.42 9.26 8.62 8.33 8.55 AVC 100 53.33 41.67 33.85 32.10 33.33 37.04 43.10 51.67 64.96 ATC 200 86.67 62.50 49.23 45.45 43.75 46.30 51.72 60.00 73.51 30 22.22 11.76 25 40 66.67 125 300 -466.67 MC

TYPICAL TOTAL COST CURVES

$ TC

TVC

TFC Output

AVERAGE AND MARGINAL COST CURVES

$ MC ATC

AVC

AFC Output

CONCLUSION:
y In this manner, We gathered knowledge regarding cost,

cost concept, cost curves in detail. In short, y Cost is expenditure incurred for various factors of production. y Cost concept is used to analyze two things: (a) short-run decision making. (b) long-run decision making. y Cost curve is a graph of cost of production which helps to determine profit.