This document is a project submission on microeconomics by Chanchal Saharma, a first year BBA student. It contains an introduction and contents section listing the main topics: cost, the relationship between total cost, variable cost and fixed cost, the relationship between average cost and marginal cost, and revenue. It then provides details on each topic in separate sections, defining key terms and concepts and illustrating relationships between costs and revenues with tables and graphs.

1. PROJECT SUBBMISION
ON
“MICRO ECONOMICS”
BY
CHANCHAL SAHARMA
(BBA 1ST YEAR)
106/10 Civil lines, Ajmer 305001
Website: www.Dezyneecole.com

2. CONTANTS
Pages
What is cost…………………….…… 1
Relation between TC, VC and FC………5
Relation between AC and MC…………7
What is revenue……………………… 9
Conclusion……….……………..…….10

3. COST
1. Accounting and economic cost: - money cost
is the total money expenses in occurred by a
firm in producing a commodity. They include
wages and salaries by lab our; light fuel
advertisement and transportation insurance
charges and all types of taxes.
 Explicit costs are the payment to outside
suppliers of input.
 Implicit costs are the inputted values of the
entrepreneurs own resources and services.
Implicit costs are the values of owned inputs
used by firm in its own production process.
2. Production costs: - In the production process
many fixed and variable factors are used.
They are employed at various prices

4. I. Total variable costs: - total variable costs
are those expenses of production which changes
with the changes in the firm‟s output. Larger
inputs require large input of labor, row
materials, power, fuel etc. which increase the
expenses of production, when output is
reduced. Variable costs also diminish. They
cease when production stops altogether.
Marshall called these variable costs as prime
costs of production.
II. Total fixed costs: - Called supplementary
costs by Marshall are those expenses of
production which do not change with the
change in output. They are rent and
interest payment depreciation charges
wages and salaries of the permanent
staff etc. fixed costs have to be incurred
by the firm, even if it stops production
temporarily.

5. 3. Real costs: - Money costs are the expenses of
production from the point of view of the
producer. But they tell us nothing about
what lies behind these costs. Marshall
thought that the effort and sacrifices
undergone by the various member of the
society in producing a commodity are the real
costs of production.
4. Opportunity cost: - The opportunity of anything
is the next best alternative that could be produce
instead by the same factors or by an equivalent
group of factors, costing the same amount of
money.
I. Explicit cost:- are those expenses which are
incurred by the firm in buying the goods and
services directly

6. II. Implicit cost:- are the imputed value of the
entrepreneur‟s own resources could and
services
5. Private and social costs: - private costs are the
costs incurred by a firm in producing a
commodity or service. These include both explicit
and implicit costs. However the production
activities of a may lead to economic benefit or
harms for others. For example production of
commodities like steal, rubber, and chemical,
pollutes the environment which leads to social
cost.
6. The cost function: - The costs function express a
functional relationship between total cost and
factors.
C = f (Q, T, P, F)
C = cost; f = function
Q = output; T = technology
P = price; F = factors

7. THE RELATION BETWEEN TOTAL COST,
VARIABLE COST AND FIXED COST
T TFC TVC TC AFC AVC ATC MC
(Q) 2 3 4 5 6 7 8
1 (2+3) (2/1) (3+1) (3+1) (from
4)
0 300 0 300 300 0 300 -
1 300 300 600 300 300 600 300
2 300 400 700 150 200 350 100
3 300 450 750 100 150 250 50
4 300 500 800 75 125 200 50
5 300 600 900 60 120 180 100
6 300 720 1020 50 120 170 120
7 300 890 1190 42.9 127.1 170 170
8 300 1100 1400 37.5 137.5 175 210
9 300 1350 1650 33.3 150 183.3 470
10 300 2000 2300 30 200 230 650
The relation between total cost, variable cost and fixed
cost is shown in table where column (1) indicates
different levels of output from 0 to 10 units. Columns

8. (2) indicate the total fixed cost (TFC) remain at rs. 300
at all levels of output. Column (3) shows total variable
cost (TVC) which is zero when output is nothing and
they continue to increase with the rise in output. In the
beginning they rise quickly then they slows down as the
firm enjoy economies of larger scale production with
further increase in output and later on due to
diseconomies of production the variable cost starts
rising rapidly. Column (4) relates to total costs which
are the sum of column 2 and column 3 i.e.
TC=TFC+TVC. Total costs vary with total variable
costs when the firm starts production.
The cost relations are shown in
figure where the distance between
the horizontal line FC and x axis
measures the total fixed cost and
the distance above the FC curve
i.e. between TC and TFC. Thus at
OQ, level of output
TC=TFC+TVC is Q, L=QP+PL.
similarly at OQ2 level of output
Q2S+SM.

9. Relation between AC and MC
There is a direct relationship
between AC and MC curve as
shown in figure Output Both the
AC curve and MC curve are U-
shaped.
1. When AC falls, MC is less than AC. This is
because the fall in MC is related to one unit of
output while in the case of AC the same decline is
spread over all units of output. That is why fall in
AC is less and in MC is more.
2. When AC is minimum, MC equals AC. The
MC curve cuts the AC curve from below at its
minimum point B.

10. 3. When AC is rises, MC is greater than AC. MC
is above AC when AC is rising but the rise in MC
is greater than AC. This is because the rise in MC
is result of the increase in one unit of output while
in case of AC the same increase is spread over all
units of output.
4. Nothing can be said about the direction of
MC, when AC rises or falls. When AC is
falling, it is not essential that MC must fall.
5. Relation between AC and MC is the same in
the short-run and long-run. But their shapes
differ: both are U-shaped in short-run and flat
in the long-run.

11. REVENUE
The term „revenue‟ refers to the receipts obtained
by a firm from the sale of certain quantities of a
commodity at various prices. The revenue concept
relates to total revenue, average revenue and
marginal revenue.
TOTAL REVENUE is the total sale proceeds of a
firm by selling a commodity at a given price.
AVERAGE REVENUE is the average receipts
from the sale of certain units of the commodity. It
is found by dividing the total revenue by the
number of units sold.
MARGINAL REVENUE is the addition to total
revenue as a result of small increase in the sale of a
firm.

12. Conclusion
In this project we study about cost and
revenue. This project tells us the meaning of
cost and revenue types of cost and revenue and
relation between cost and revenue.