concept of cost and revenue in economics pdf

Concept Of Cost And Revenue In Economics Pdf

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Normal Profits Minimum profits required to keep the entrepreneur in production in the long run.


Cost , in common usage, the monetary value of goods and services that producers and consumers purchase. In a basic economic sense, cost is the measure of the alternative opportunities foregone in the choice of one good or activity over others. This fundamental cost is usually referred to as opportunity cost. For a consumer with a fixed income, the opportunity cost of purchasing a new domestic appliance may be, for example, the value of a vacation trip not taken. More conventionally, cost has to do with the relationship between the value of production inputs and the level of output. Total cost refers to the total expense incurred in reaching a particular level of output; if such total cost is divided by the quantity produced, average or unit cost is obtained.

Revenue: The Meaning and Concept of Revenue | Micro Economics

Cost refers to an amount to be paid or given up to acquire any resources or services. In economics cost can be defined as a monetary,valuation of effort, materials,resources,time and opportunity forgone in production of goods and services. Cost also refers to how to order level of production. Other things remaining equal to the higher the level of output the lower the cost of producing a using it or commodity. As output increases the total cost of production increases.

Theory of Cost & Revenue

Revenue , in economics , the income that a firm receives from the sale of a good or service to its customers. Technically, revenue is calculated by multiplying the price p of the good by the quantity produced and sold q. The sum of revenues from all products and services that a company produces is called total revenue TR. An important aspect of revenue in economic analysis is the notion of marginal revenue.

Read this article to learn about the meaning and concept of revenue, micro economics! The amount of money that a producer receives in exchange for the sale proceeds is known as revenue. For example, if a firm gets Rs.

The Concepts of Revenue

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In economics , profit maximization is the short run or long run process by which a firm may determine the price , input and output levels that lead to the highest profit. Neoclassical economics , currently the mainstream approach to microeconomics , usually models the firm as maximizing profit. There are several perspectives one can take on this problem. First, since profit equals revenue minus cost , one can plot graphically each of the variables revenue and cost as functions of the level of output and find the output level that maximizes the difference or this can be done with a table of values instead of a graph.

Every firm or producer aims at maximisation of its profits. The maximisation of profit is only possible when the cost of production of a commodity is at its minimum level and the price is at its maximum level. Thus, the volume of profit is the difference between the total revenue and total cost of an individual firm or producer. Total Revenue TR :. Total revenue is the total money receipts of a firm or producer with sales of its output.

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Johanna K.

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Brandon T.

MODULE - 3. Cost and Revenue. ECONOMICS. Notes. Producing Goods and In order to understand the meaning of cost let us take the example of a farmer.


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Jenn S.

Revenue is the income a firm retains from selling its products once it has paid indirect tax, such as VAT.


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