Unit 1: Basic Economic Concepts - Total Revenue

January 30, 2018

Total Revenue

• Total Revenue = P (price) x Q (quantity)
• Fixed Costs: A cost that does not change no matter how much of a good is being produced.
• Example: salary, mortgage, insurance
• Variable Costs: A cost that rises and falls depending upon how much is produced.
• Example: Electricity bill, cell phone bill
• Marginal Costs: The cost of producing one more unit of a good.
• Marginal Revenue: Additional income from selling another amount of a good.
• Purpose: make additional profit
• Revenue: what you bring in
• Cost: what you spend

• Formulas:
• TFC (total fixed cost) + TVC (total variable cost) = TC (total cost)
• AFC (average fixed cost) + AVC (average variable cost) = ATC (average total cost)
• TFC (total fixed cost) / Q (quantity) = AFC (average fixed cost)
• TVC (total variable cost) / Q (quantity) = AVC (average variable cost)
• TC (total cost) / Q (quantity) = ATC (average total cost)
• /⃤ TC (change in total cost) /  ⃤ Q (change in quantity) = MC (marginal cost)