Summary calculations for cost of production (updated version)

Updated version

Profit = TR - TC

= (P × Q) - TC

= (P × Q) - (TFC + TVC)

= (P × Q) - TFC - TVC

= (P × Q) - (ATC × Q)

TR = P × Q

= Profit + TC

= MR × Q

= AR × Q

P = TR ÷ Q

= MR or ∆TR ÷ ∆Q (Applicable under perfect competition)

= AR or TR ÷ Q

= MC or ∆TC ÷ ∆Q (Profit maximization of perfect competition)

Quantity = TR ÷ Q

= Qs = Qd (Market equilibrium)

MC = ∆TR ÷ ∆Q

= MR (maximization rule)

MR = ∆TR ÷ ∆Q

= MC (Maximization rule)

= AR (Applicable under perfect competition)

TFC = Q = 0

=TC - TVC

= AFC × Q

TVC = TC - TFC

= AVC × Q

TC = TFC + TVC

= ATC × Q

= TR - Profit

AFC = TFC ÷ Q

= ATC - AVC

= (TC - TVC) ÷ Q

AVC = TVC ÷ Q

= ATC - AFC

= (TC - TFC) ÷ Q

ATC = TC ÷ Q

= AFC + AVC

= (TFC + TVC) ÷ Q

Opportunity Cost

Of the study of Economics is how individuals make decisions to satisfy their unlimited needs and wants using scarce/limited resources.

Three main concepts in Economics:

1. Scarcity

2. Choice

3. Opportunity cost

Acknowledging resources are scarce consumers are bind to make choices, for instance given a fixed 24 hours in day, individuals have to decide how many hours to allocate to workout and how many hours to dedicate to playing or socializing.

All play no work made Jack a mere toy.

All work no play made Jack a dull boy.

This is the reason people tend to strike a balance between activities.

One thing to bring to your attention, we do not necessarily have 24 hours. Your day starts when you wake up, for instance an average person must sleep for at least 7 hours.

X = 24hrs - 7hrs

X = 17hrs

Therefore, an average person has 17 per day to distribute across his/her desired activities.

Opportunity cost is a crucial concepts that sets the foundation of everything you are yet to learn in economics. Most students struggle a bid with Microeconomics, studying the indifference curves having the impression that they are studying something totally new, while is not. It is the same old opportunity cost you learned in introduction to Economics under unit 1.

Opportunity refer to the value of the best alternative that is yet to be forgone to obtain something else. Similar to saying for one to seize a certain job opportunity one has to forfeit the other job opportunity. Let us presume that after getting your degree in Economics you applied for lecturing post in two different institution. 3 weeks later after you have been called to both interviews you get an acceptance email that you got the job from both institutions. You have to decide which one to take and either way you forfeiting the best value, hence in the study of consumer behavior we say one is indifferent because either items give one equal satisfaction.

Opportunity cost is that important yet is underrated.

Application of opportunity cost

• The opportunity cost of reading this post is listening to audible or visual version of this post

• The opportunity cost of remotely learning on this platform is learning through contact lessons

• The opportunity cost of video calling someone is voice calling someone

• The opportunity cost of inflation in the short-run is unemployment

• The opportunity cost of performing as an absolute labour intensive firm is performing as an absolute capital intensive firm

• The opportunity cost of watching movies on Netflix or YouTube is going to the Cinema to watch movies

• The opportunity cost of buying an existing business is starting a business from scratch

• The opportunity cost of the nation using renewable resources to generate energy is using non-renewable resources

• The opportunity cost of lying in court is telling the truth

• The opportunity cost of renting a property is buying a property

• The opportunity cost of importing cars from Germany is domestically producing those cars

• The opportunity cost of ageing is being young or forever young like Peter Pan

• The opportunity cost of being happily married is being single and mingling

• The opportunity cost of being in partnership is operating as a sole proprietor

• The opportunity cost purchasing a laptop today is buying a smartphone

Opportunity Cost

Of the study of Economics is how individuals make decisions to satisfy their unlimited needs and wants using scarce/limited resources.

Three main concepts in Economics:

1. Scarcity

2. Choice

3. Opportunity cost

Acknowledging resources are scarce consumers are bind to make choices, for instance given a fixed 24 hours in day, individuals have to decide how many hours to allocate to workout and how many hours to dedicate to playing or socializing.

All play no work made Jack a mere toy.

All work no play made Jack a dull boy.

This is the reason people tend to strike a balance between activities.

One thing to bring to your attention, we do not necessarily have 24 hours. Your day starts when you wake up, for instance an average person must sleep for at least 7 hours.

X = 24hrs - 7hrs

X = 17hrs

Therefore, an average person has 17 per day to distribute across his/her desired activities.

Opportunity cost is a crucial concepts that sets the foundation of everything you are yet to learn in economics. Most students struggle a bid with Microeconomics, studying the indifference curves having the impression that they are studying something totally new, while is not. It is the same old opportunity cost you learned in introduction to Economics under unit 1.

Opportunity refer to the value of the best alternative that is yet to be forgone to obtain something else. Similar to saying for one to seize a certain job opportunity one has to forfeit the other job opportunity. Let us presume that after getting your degree in Economics you applied for lecturing post in two different institution. 3 weeks later after you have been called to both interviews you get an acceptance email that you got the job from both institutions. You have to decide which one to take and either way you forfeiting the best value, hence in the study of consumer behavior we say one is indifferent because either items give one equal satisfaction.

Opportunity cost is that important yet is underrated.

Application of opportunity cost

• The opportunity cost of reading this post is listening to audible or visual version of this post

• The opportunity cost of remotely learning on this platform is learning through contact lessons

• The opportunity cost of video calling someone is voice calling someone

• The opportunity cost of inflation in the short-run is unemployment

• The opportunity cost of performing as an absolute labour intensive firm is performing as an absolute capital intensive firm

• The opportunity cost of watching movies on Netflix or YouTube is going to the Cinema to watch movies

• The opportunity cost of buying an existing business is starting a business from scratch

• The opportunity cost of the nation using renewable resources to generate energy is using non-renewable resources

• The opportunity cost of lying in court is telling the truth

• The opportunity cost of renting a property is buying a property

• The opportunity cost of importing cars from Germany is domestically producing those cars

• The opportunity cost of ageing is being young or forever young like Peter Pan

• The opportunity cost of being happily married is being single and mingling

• The opportunity cost of being in partnership is operating as a sole proprietor

• The opportunity cost purchasing a laptop today is buying a smartphone