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.

Samacheer Kalvi 11th Economics Notes