Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. If you continue browsing the site, you agree to the use of cookies on this website. See our User Agreement and Privacy Policy.

Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. If you continue browsing the site, you agree to the use of cookies on this website. See our Privacy Policy and User Agreement for details.

Successfully reported this slideshow.

Like this presentation? Why not share!

8,985 views

Published on

A2 Microeconomics: Understanding Short Run Costs

No Downloads

Total views

8,985

On SlideShare

0

From Embeds

0

Number of Embeds

4,339

Shares

0

Downloads

4

Comments

1

Likes

8

No embeds

No notes for slide

- 1. A2 Microeconomics: Understanding Short Run Costs<br />Short run costs<br />Fixed Costs<br />Variable Costs<br />AC, MC and AVC<br />
- 2. Fixed Costs<br />In the short run, because at least one factor of production is fixed, output can be increased only by adding more variable factors<br />Hence we make a distinction between fixed and variable costs<br />
- 3. Give 5 fixed costs for a brewing business such as Heineken<br />
- 4. Identify some of the variable costs of production here<br />
- 5. What makes RyanAir a leading low-cost airline?<br />
- 6. RyanAir Network Route Map<br />
- 7. Give me<br />5<br />Factors that make RyanAir one of the world’s most cost-efficient airlines<br />
- 8. The Low Cost Airline Model<br />RyanAir – now Europe’s biggest airline<br />Carries most passengers (75m in 2011)<br />Coverage = 1,300+ Routes & 45 Bases<br />272 Boeing 737-800‘s + Newest fleet<br />Load factor: 83%<br />Average fare (including bag): €43<br />Revenue per passenger: €54<br />
- 9. Fixed Costs<br />Fixed costs<br />Do not vary directly with the level of output i.e. they are treated as independent of production<br />Examples of fixed costs<br />Rental costs of buildings<br />Costs of purchasing capital equipment<br />Pay of full-time contracted salaried staff<br />Interest payments on loans<br />Depreciation of fixed capital (due solely to age)<br />
- 10. Fixed Cost Curves<br />Costs<br />Total Fixed Cost<br />Output<br />
- 11. Fixed Cost Curves<br />Costs<br />Total Fixed Cost<br />Average Fixed Cost<br />Output<br />
- 12. Variable Costs<br />Costs that vary directly with output<br />Examples of variable costs<br />Costs of intermediate raw materials and components<br />Wages of part-time staff or employees paid by the hour<br />Costs of electricity and gas<br />Depreciation of capital due to wear and tear. <br />Total variable cost rises as output increases<br />Average variable cost (AVC) = total variable costs (TVC) /output (Q)<br />
- 13. Marginal Cost (MC)<br />Marginal cost is the change in total costs from increasing output by one extra unit. <br />The marginal cost of supplying extra units of output is linked with the marginal productivity of labour. <br />The law of diminishing returns implies that marginal cost will rise as output increases. <br />
- 14. The Marginal Cost Curve<br />Marginal Cost (MC)<br />Costs<br />Output<br />
- 15. An increase in marginal costs<br />MC2<br />Costs<br />MC1<br />Output<br />
- 16. Variable Cost Curves<br />Costs<br />Marginal Cost<br />Average Variable Cost<br />Output<br />
- 17. An Increase in Variable Costs<br />MC2<br />Costs<br />AVC2<br />MC1<br />Average Variable Cost<br />Output<br />
- 18. Family of short run cost curves<br />Costs<br />MC<br />ATC<br />AVC<br />Output<br />
- 19. A change (fall) in fixed costs<br />Costs<br />MC<br />ATC1<br />ATC2<br />AVC<br />Output<br />

No public clipboards found for this slide

×
### Save the most important slides with Clipping

Clipping is a handy way to collect and organize the most important slides from a presentation. You can keep your great finds in clipboards organized around topics.

Like Microeconomics till to date? Where r u now a days? What r u doing? Visit Department when u r free