Mid – II PRESENTATION

MANAGERIAL
ECONOMICS
TOPIC : COST – OUTPUT RELATIONSHIP

PRESENTED BY :
CH . SOWMYA
21L31E0020
MBA – A SEC
Cost – output relationship
Cost output relation facilitates managerial
decisions such as :
 Formulating a rational policy on plant size and
standards of operations .
 Expense control
 Profit prediction
 Pricing
 Promotion

C = f ( S, O, P, T ……)
Cost – output relationship in short run

Short run may be studied in terms of

 Average Fixed cost

 Average Variable cost

 Average Total cost

OUTPU TC TFC TVC AFC ATC AVC MC
T
0 1200 300 - - - - -

1 1800 300 1500 300 1800 1500 600

2 2000 300 1700 150 1000 850 200

3 2100 300 1800 100 700 600 100

4 2250 300 1950 75 562.5 487.5 150

5 2600 300 2300 60 520 460 350

Cost – output relationship in long run

 All factors became variable in the long run .

 Long run may be studied in terms of

 total cost
 average cost
 marginal cost
THANK YOU