COST OUTPUT INPUT EXPENDITURE INCURRED ON THESE INPUTS

COST OUTPUT INPUT EXPENDITURE INCURRED ON THESE INPUTS IS KNOWN AS THE COST OF PRODUCTION. revenue cost IN ECONOMICS COST IS THE SUM TOTAL OF EXPLICIT COST AND IMPLICIT COST

Table No. 1 Title – contribution of different sectors of economy to India’s national income in 1950 -51 & 20012002 Head note – data in % YEAR SECTORS PRIMARY SECONDARY TRETIARY 1950 -51 49 16. 7 34. 3 2001 -02 26 24. 5 49. 5 FOOT NOTE – SOURCE – Economic survey 2002 -2003

EXPLICIT COST • IMPLICIT COST PAYMENT MADE TO OUTSIDERS • PAYMENT FOR THE INPUTS SUPPLIED BY THE OWNERS WAGES EMPLOYEE RENT PREMISES HIRED PAYMENT RAW MATERIAL • INTEREST CAPITAL INTEREST BANK • RENT ON OWN OF OWN LAND • SALARY FOR OWN SERVICES AS AN ENTREPRENEUR

COST FUNCTION C =f(q) COST OUTPUT

SHORT RUN COST OUTPUT FIXED COST TFC = TCTVC VARIABLE COST TVC = TCTFC TOTAL AFC = AVC= COST FC/OUTPU TVC/OUTP TC = TFC + T UT TVC AC= TC/OUTPU T AC = AVC + AFC MC=TCn. TCn-1 MC = TVCn-1 0 12 12/0 = - - - 1 12 6 (6) 18 12/1= 12 6 18 6 2 12 10 (4) 22 12/2= 6 5 11 4 3 12 15 (5) 27 12/3 = 4 5 9 5 4 12 24(9) 36 12/4 = 3 6 9 9 5 12 35(11) 47 12/5 = 2. 4 7 9. 4 11

OUTPUT TC AC MC 0 50 - - 1 70 70 20 2 100 50 30 3 151 50. 33 51 4 207 51. 75 56 5 6 267 337 53. 4 56. 1 60 70

RELATION BETWEEN VARIOUS COSTS.

Revenue TOTAL Revenue TR AVERAGE Revenue AR = TR /QUANTITY MARGINAL Revenue MR = TRn – TRn-1

RELATION SHIP BETWEEN REVENUE CONCEPTS • WHEN PRICE REMAINS CONSTANT UNITS PRICE/ TR=AR MR AR XQ. 1 10 10 10 20 10 30 10 40 10 50 10 • WHEN PRICE FALLS WITH RISE IN OUTPUT UNITS P/AR TR= AR X Q. MR 1 5 5 5 2 4 8 3 3 3 9 1 4 5 2 1 8 5 -1 -3

SUPPLY PRODUCER EQUILIBRIUM(X) REVENUE COST PRODUCTION FUNCTION

SUPPLY 1. QUANTITY 2. WILLINGNESS AND ABLE 3. PRICE 4. PERIOD OF TIME STOCK 50 K. G (50). SUPPLY 10 K. G.

DETERMINANTS OF INDIVIDUAL SUPPLY PX 10 LAW OF SUPPLY INPUT PRICE COST PROFIT FALLS SUPPLY FALLS 1. PRICE OF THE GIVEN COMMODIT Y ‘X’ 2. PRICE OF OTHER GOODS ‘Y’ 3. PRICE OF INPUTS SUPPLY OF ‘X’ FALLS PY 15

4. STATE OF TECHNOLOGY 5. GOVT. POLICY TAX IMPOSE SUBSIDIES TECHNOLOGY IMPROVED COST DECREASES PROFIT INCREASES SUPPLY INCREASES 6. GOALS/ OBJECTIVE MARKET SUPPLY ALL THE POINTS OF INDIVIUAL SUPPLY+ 1. NUMBER OF FIRMS 2. FUTURE EXPECTATION 3. MEANS OF TRANSPORTATION AND COMMUNICATION TECHNOLOGY DEGRADED COST INCREASES PROFIT DECREASES SUPPLY DECREASES

SUPPLY FUNCTION INDIVIDUAL SUPPLY FUNCTION Sx = f(Px, Po, Pf, St, T, G) MARKET SUPPLY FUNCTION Sx = f(Px, Po, Pf, St, T, G, N, F, M) SUPPLY SCHEDULE INDIVIDUAL MARKET

0 INDIVIDUAL SUPPLY SCHEDULE PRICE QUANTITY SUPPLIED (A) PRICE ‘A’ ‘B’ MARKET SUPPLY 1 2 3 4 5 5 10 15 20 25 10 20 25 35 40 15 30 40 55 65 5 10 15 20 25 MARKET SUPPLY SCHEDULE

LAW OF SUPPLY PRICE x Direct relationship price QS 1 2 3 4 5 10 20 30 40 50 QUANTITY supplied x

• REASONS FOR LAW OF SUPPLY • EXCEPTIONS • PROFIT MOTIVE • FUTURE EXPECTATIONS • CHANGE IN NUMBER OF FIRMS • AGRICULTURAL GOODS • CHANGE IN STOCK • PERISHABLE GOODS • RARE ARTICLES • BACKWARD COUNTRIES

MOVEMENT ALONG THE SUPPLY CURVE OR CHANGE IN QUANTITY SUPPLIED • EXPANSION P QS 20 25 100 150 20 25 PX 20 0 • CONTRACTION 100 150 PO PF S T GOAL 10 0 70 100 P Q. S. 20 10 100 70

s t u d e n t s y 140 130 120 110 100 No. of students in sr. sec. school 0 2011 2012 2013 2014 years Y x AR/MR AR UNITS SOLD X 0 MR

EFFECT ON SUPPLY CURVE DUE TO CHANGE IN OTHER FACTORS 1. CHANGE IN PRICE OF OTHER GOODS ON COMMODITY ‘X’.

CHANGE IN PRICE OF FACTORS OF PRODUCTION MILK = ₹ 50 K. G. MILK = ₹ 80 K. G. MILK = ₹ 50 K. G.

TAXATION POLICY CHANGE IN TECHNOLOGY

PRICE ELASTICITY OF SUPPLY P 10 20 Q. S A 100 250 Q. S. B 50 100