Tamilnadu Samacheer Kalvi 11th Economics Notes Chapter 4 Cost and Revenue Analysis Notes
→ “The big hurdle is going out and raising the revenue” – Tyler Cowen
→ Cost and revenue analysis refers to examining the cost of production and sales revenue of a production unit or firm under various conditions.
→ Cost Analysis : Cost refers to the total expenses incurred in the production of a commodity.
→ Money Cost: Production cost expressed in money terms is called as money cost.
→ Real Cost: Real cost refers to the payment made to compensate the efforts and sacrifices of all factor owners for their services in production.
→ Explicit Cost: Payment made to others for the purchase of factors of production is known as Explicit Costs.
→ Implicit Cost: Payment made to the use of resources that the firm already owns, is known as Implicit Cost.
→ Sunk Cost: A cost incurred in the past and cannot be recovered in future is called as Sunk Cost.
→ Floating Cost: Floating cost refers to all expenses that are directly associated with business activities but not with asset creation.
→ Total Cost Curves : Total Cost means the sum total of all payments made in the production.
→ Average Fixed Cost (AFC): Average fixed cost refers to the fixed cost per unit of output. It is obtained by dividing the total fixed cost by the quantity of output.
→ Revenue Analysis : The amount of money that a producer receives in exchange for the sale of good is known as revenue.
→ Revenue Concepts: The three basic revence concepts are:
Average Revenue: Average Revenue is the revenue per unit of the Commodity sold.
Total Revenue: Total revenue is the amount of income received by the firm from the sale of its products.
Marginal Revenue : Marginal revenue (MR) is the addition to the total revenue by the sale of an additional unit of a commodity.
→ TR, AR, MR and Elasticity of Demand : The relationship between the AR curve and MR curve depends upon the elasticity of AR curve (AR = DD = Price.)
→ Cost: It refers to expenses incurred on production
→ Revenue: It refers to sales revenue
→ Explicit Cost: It refers to out of pocket expenses of money cost or accounting costs. They are the payments made to others.
→ Implicit Cost: The cost imputed for the resources provided by the owner.
→ Fixed Costs: The costs that remain constant at all levels of output. They do not vary with output.
→ Variable Cost: The cost that varies with the level of output.
→ Total Costs: The sum of total fixed cost and total variable costs.
→ Marginal Cost: The additional cost incurred for producing one more unit of output.
→ Average Cost: Cost per unit of output produced. It is obtained by dividing total cost by output.
→ Average Variable Cost: Variable Cost per unit of output, obtained by dividing total variable cost by output.
→ Average Fixed Cost: Fixed cost per unit of output, obtained by dividing total fixed cost by output.
→ Average Revenue: Average revenue refers to revenue per unit of output sold. It is obtained by dividing the total revenue by quantity sold.
→ Marginal Revenue: The additional revenue obtained by selling one more unit of output.