ILO:

a) Formulae to calculate and understand the relationship between:
o total cost
o total fixed cost
o total variable cost
o average (total) cost
o average fixed cost
o average variable cost
o marginal cost

b) Derivation of short-run cost curves from the assumption of diminishing marginal productivity

c) Relationship between short-run and long-run average cost curves

Costs

  1. What is the difference between a fixed cost and variable cost?
  2. Give 3 examples of a FC & VC?
  3. How do you calculate total cost (TC)
  4. What are the formulas for average costs and marginal cost?
  5. What is the relationship between AC & MC? (see work sheet)
  6. How does AC & MC change for a change in fixed cost and a change in variable cost?
Types of costs​

Derivation of SR cost curves from the assumption of diminishing marginal producivity

Short run costs and law diminishing returns
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Activity diagrams:
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Difference between a change in FC & VC on AC & MC

Impact fc v vc
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Relationship S/R & L/R average cost curve

How could we model Aldi decision to grow to help reduce costs?
West Midlands: Aldi planning to recreate 30,000 jobs in the UK over the next eight years
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SRAC and LRAC
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Picture

Revision

Y2 2) Fixed and Variable Costs (AFC, TFC, AVC)
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Y2 1) Law of Diminishing Returns
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Marginal and average cost
Long run average total cost curve relating to economies and diseconomies of scal