Short Run Cost Output
Relationship
MANAGERIAL ECONOMICS (PGSCM1C004T)
SUBMITTED BY: SUBMITTED TO:
GEETANJALI GUPTA Dr. NARESH SHARMA
0901917 DEPARTMENT OF
MBA(SCM) 1ST SEMESTER MARKETING AND SUPPLY
CHAIN
DEPARTMENT OF MARKETING AND
SUPPLY CHAIN CENTRAL UNIVERSITY OF
JAMMU
CENTRAL UNIVERISTY OF JAMMU
1
, Introduction
Before starting the explaination on – SHORT RUN COST
CONCEPTS….
What is Cost of production?
•It determines the profit that will be earned by a company in
production process
•Lower cost of production = higher profits for firm.
•Costs are of two types: accounting and analytical
Short run cost is a type of Analytical cost .
To understand this we need to know:
•Fixed costs
•Variable costs
•Average costs
•Marginal costs
2
, •Total cost = Fixed cost + variable cost (TC)
•Average cost = Total cost(TC) / Units of goods produced(Q) = TC/Q
•Marginal cost (MC) = TCₙ-TCₙ₋₁ (where n is number of units
produced
(MC) = ∂ TC / ∂ Q
•Fixed costs, indirect costs or overheads are business expenses that
are not dependent on the level of goods or services produced by the
business e.g. salaries , rent
•Variable costs include raw material, energy usage, labor,
distribution costs, etc
3
Relationship
MANAGERIAL ECONOMICS (PGSCM1C004T)
SUBMITTED BY: SUBMITTED TO:
GEETANJALI GUPTA Dr. NARESH SHARMA
0901917 DEPARTMENT OF
MBA(SCM) 1ST SEMESTER MARKETING AND SUPPLY
CHAIN
DEPARTMENT OF MARKETING AND
SUPPLY CHAIN CENTRAL UNIVERSITY OF
JAMMU
CENTRAL UNIVERISTY OF JAMMU
1
, Introduction
Before starting the explaination on – SHORT RUN COST
CONCEPTS….
What is Cost of production?
•It determines the profit that will be earned by a company in
production process
•Lower cost of production = higher profits for firm.
•Costs are of two types: accounting and analytical
Short run cost is a type of Analytical cost .
To understand this we need to know:
•Fixed costs
•Variable costs
•Average costs
•Marginal costs
2
, •Total cost = Fixed cost + variable cost (TC)
•Average cost = Total cost(TC) / Units of goods produced(Q) = TC/Q
•Marginal cost (MC) = TCₙ-TCₙ₋₁ (where n is number of units
produced
(MC) = ∂ TC / ∂ Q
•Fixed costs, indirect costs or overheads are business expenses that
are not dependent on the level of goods or services produced by the
business e.g. salaries , rent
•Variable costs include raw material, energy usage, labor,
distribution costs, etc
3
