Economics SSS 2 First Term

WEEK 6

Cost concepts

Performance Objectives

Student should be able to:

1. Understand basic cost concepts (Total, Average, Fixed, Variable and Marginal costs).
2. Explain the short-run and long-run costs
3. Distinguish between economists and accountants view of costs.

Content

Definition of cost of production

Cost of production refers to the total price paid for resources used to manufacture a product or create a service to sell to consumers including raw materials, labour and overhead. Cost of production can also be related to all the rewards due to factors of production, which include rent for land, wage and salary for labour, interest for capital and profits to the entrepreneur.

Basic cost concepts

1. Fixed cost (FC): Fixed cost also called overhead cost or unavoidable.... View More