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The traditional and modern theory of cost
- The traditional theory of cost consists of short and long-run costs. The short-run is fixed for some period and consists of usually entrepreneurship and equipment. The long-run is the cost over which the factors becomes variable.
- The short-run costs of traditional method include TC = TFC + TVC. They include the salaries of administrative staff, wear and tear of machinery, and expense of land and depreciation. The variable costs include the raw materials and costs of indirect labor.
- The long-run costs of the traditional method said to be in the form of a planning curve, which guides in decision making and expansion of future output. It is derived from the short-run average costs.
- The modern cost theory regards the shape of curves and appears to be in the form of U shaped. The short term curves are AFC, SMC, SAC derived form the tola fixed, and variable costs.
- Long term cost curves are L shaped and curves fall after a point and may slope down gently.
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Yogita Ingle 6 years, 4 months ago
Bernoulli’s principle states that
The total mechanical energy of the moving fluid comprising the gravitational potential energy of elevation, the energy associated with the fluid pressure and the kinetic energy of the fluid motion, remains constant.
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Yogita Ingle 6 years, 4 months ago
For certain goods and services, Government, sets minimum price. This minimum price is called minimum price ceiling.
This price is normally set at a level higher than the equilibrium price. This leads to axcess supply. Since producers are not able to sell all they want to sell, they illegally sell the good or service below the minimum price.
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Yogita Ingle 6 years, 4 months ago
Ratio of the density of a substance to the density of water at 4° C is called specific gravity of the substance.
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Yogita Ingle 6 years, 4 months ago
Ratio of the density of a substance to the density of water at 4° C is called specific gravity of the substance.
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