PowerPoint Presentation : COST AND REVENUE
PowerPoint Presentation : Money receipts by a firm from the sale of the product is called its “Revenue” For e.g. Suppose, you are running a factory producing ice-cream. You produce 1,000 ice-creams daily. By selling these ice-creams you get ₹ 1,000. in economics, this amount of ₹ 1,000 is called revenue. What is Revenue ?
PowerPoint Presentation : “ The revenue of a firm is its sale receipts or money receipts from the sale of a product.” Definition :
PowerPoint Presentation :
PowerPoint Presentation : Total Revenue is the total amount of money received by the firm from the sales. It can be calculated by multiplying the units of the sale with the price. TR=P×Q TR = Total Revenue P = Price per unit Q = Quantity of output For e.g. Selling price of a product is Rs 10 per unit and total unit sold is 1000. Total Revenue will be =10×1000 ₹ TR= 10,000 ₹ TOTAL REVENUE
PowerPoint Presentation : MARGINAL REVENUE Marginal revenue is the change in total revenue realized from the sale of an additional unit of commodity. MR=∆TR/∆Q MRᵑ=TRᵑ - TRᵑ ̵ ¹ Fro e.g. If TR= ₹ 1,000 when 10 units of a commodity are sold, and it is ₹ 1,100 when 11 units of a commodity are sold, then additional revenue is ₹ 100 which is marginal revenue.
PowerPoint Presentation : AR(Average Revenue) = Price Average revenue Average revenue is the price per unit. It can be obtained by dividing total revenue by the quantity sold. AR= Total Revenue = TR = PQ = P No. of units sold Q Q For e.g. TR = ₹ 1,000, and Q =100, then AR = TR = 1,000 = ₹ 10 Q 100 Thus, AR refers to the rate at which output is sold. What is rate? Definitely, it is the price. Accordingly, AR is nothing but price of the product.
PowerPoint Presentation : RELATIONSHIP BETWEEN TOTAL, AVERAGE AND MARGINAL REVENUE TR is maximum B TR OUTPUT OUTPUT TOTAL REVENUE AVERAGE/MARGINAL REVENUE X X - ve MR AR Y Y
PowerPoint Presentation : What is Cost ? Cost or production cost refers to all sorts of monetary expenditures incurred in the production of the commodity. For e.g. in order to produce goods a firm uses raw material and factors of production (land, labour, capital etc.)
PowerPoint Presentation : TYPES OF COST
PowerPoint Presentation : Cost of Production : Prime (Variable Cost) & Supplementary (Fixed Cost ) Fixed cost are those expenses which must be incurred in any case whether there is any production or not. The ↑ or ↓ in the production does not have any effect upon the fixed cost even if the production is nil or zero, then also the fixed cost remains similar. Output (in units) TFC 0 1 2 3 4 5 100 100 100 100 100 100 150 100 50 1 2 3 4 5 TFC Total fixed Cost Curve Cost 0
PowerPoint Presentation : Variable Cost are those expenses which are directly related to the quantity of production are known as prime cost or variable cost. They vary with the output. If the production ↑ , the prime cost ↑ & if the production ↓ ,the prime cost ↓ . These cost include the cost of raw materials used in making the commodity. Output (in units) TVC (in ₹ ) 0 1 2 3 4 5 0 20 30 40 60 90 1 2 3 4 5 100 80 60 40 20 0 OUTPUT TVC VC Variable Cost
PowerPoint Presentation : RELATION BETWEEN TOTAL , FIXED AND VARIABLE COST 80 70 60 50 40 30 20 10 1 2 3 4 5 6 7 0 OUTPUT(units) Cost ( ₹ ) TC VC FC Total Cost
PowerPoint Presentation : THANK YOU !