PRESENTATION ON COST & REVENUE.

Presented To: Mr. Abdur Rab. (Business Economics).

Presented By Group Members: Hira Naeem. (7214).Maha Haider. (8532).

Syed Zamin Ali Shah. (8914).Uzma Zaheer. (7220).

Cost: Amount of

money spend to produce goods

Total CostTotal economic cost of production consisting of

fixed and variables costs.

Fixed Costs = Costs that don’t change based on production. example: rent.

Variable Costs = Costs that change with rate of production example: cost of raw materials.

Total Costs = Fixed Costs + Variable Costs.

TC, TVC, TFC Graphical Representation

Different types of Cost:Economic Cost: The cost of production which

take into account both Explicit cost and Implicit cost can be considered as Economic cost.

Economic cost = Explicit cost + Implicit cost.Explicit Cost: Money payments that a firm makes

to the outsiders who supply inputs. These are “out of pocket” costs e.g. salaries, price paid for raw materials etc. It is also known as accounting cost.

Implicit Cost: The cost of “self owned” resources which are employed by the firm and are non-expenditure costs e.g. salary of proprietor etc. It is also known as opportunity cost.

Cost Concepts:Marginal Cost: The addition to cost

associated with one additional unit of output.MC = Change in TC/Change in Q.Average Total Cost: Total Cost/Output, the

cost per unit of production.ATC = TC/Q.Average Variable Cost: Total Variable

Cost/Output, the average variable cost per unit of production.

AVC= TVC/QAverage Fixed Cost: Total Fixed Cost/Output,

the average fixed cost per unit of production.AFC = TFC/Q.

Figure of Marginal Cost, Average Total Cost, Average Variable Cost, and Average Fixed Cost.

P

Q

MC ATC

AVC

AFC

Revenue: Amount of

money earned

after selling the

products.

Different types of Revenue:Total Revenue: Total earnings from sales over

a certain period of time.TR = P*Q.Average Revenue: Revenue generated by per

unit sold.AR = TR/Q.Marginal Revenue: Change in revenue when

output changes by one unit.MR = Change in TR/Change in Q.

Figure of Total Revenue, Average Revenue and Marginal Revenue.

PPTR

P* AR P*=Marginal Revenue

Thank You So Much! Any Questions Please?