- Costs, Revenues and Profit
- what firms must invest in to run their business
- Fixed - costs that do not vary with output (e.g. rent)
- Variable - costs that vary directly with output (e.g. raw materials)
- Average costs = total costs/output
- Total costs = fixed costs + variable costs
- A businesses costs are aimed to be as low as possible to ensure that they have an achievable amount of profit.
- Total revenue - price x quantity sold
- The amount a firm receives from selling its products
- Total revenue = total revenue/output
- It is important for a business to gain as much revenue as possible to make the highest possible profit.
- If the business doesn't make enough revenue, there could be higher costs resulting in a loss.
- Profit = total revenue - total costs
- The money left over after costs are paid
- Especially for new businesses, profit is mainly used to improve the efficiency and quality of the service or products sold. Also, profit is put towards the growth of the business.
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