Costs - theme 3.
Short run - at least one factor of production is fixed.
Long run - all factors of production are variable.
Short run:
-Because there is at least one FOP that is fixed, the
others could be variable.
-Therefore, in the short run there are fixed costs and
variable costs.
Variable costs.
- They vary with output, e.g. raw materials,
ingredients, wages.
Fixed costs.
-Don't vary with output e.g. capital, space, salaries
- (salaries are paid annually hence why they are fixed.
Wages are paid in accordance to how many hours are
worked hence why they are variable)
Total cost:
Short run - at least one factor of production is fixed.
Long run - all factors of production are variable.
Short run:
-Because there is at least one FOP that is fixed, the
others could be variable.
-Therefore, in the short run there are fixed costs and
variable costs.
Variable costs.
- They vary with output, e.g. raw materials,
ingredients, wages.
Fixed costs.
-Don't vary with output e.g. capital, space, salaries
- (salaries are paid annually hence why they are fixed.
Wages are paid in accordance to how many hours are
worked hence why they are variable)
Total cost:
